British private equity firm BC Partners and Canadian waste management company GFL Environmental Inc. GFL-T are teaming up to buy Coco Paving Group, the family business run by the controlling shareholders of troubled Bridging Finance Inc., The Globe and Mail has learned.
London-based BC Partners will be the majority owner, while GFL will hold a minority position, according to someone familiar with the transaction. GFL founder Patrick Dovigi is also personally investing. Together, the buyers will jointly own a new entity chaired by Mr. Dovigi, called Green Infrastructure Partners, that will house the paving company.
The Globe is not identifying the source because they are not authorized to speak publicly about the deal.
Coco Paving is a family business run by siblings Jenny and Rock-Anthony Coco that predominately operates in Ontario, where GFL is also based. The Globe reported Tuesday that the Cocos are in talks to sell the business, and subsequently learned a deal with BC and GFL has been signed.
The Coco siblings also own 58 per cent of Bridging, a Toronto-based private lender that was placed under the control of a court-appointed receiver, PricewaterhouseCoopers LLP, in April at the request of the Ontario Securities Commission. The regulator has alleged David Sharpe, Bridging’s former chief executive officer, oversaw a number of loans that benefited him and his wife, Natasha Sharpe.
Ms. Sharpe previously worked as Bridging’s chief investment officer, and she is a minority shareholder in the business alongside the Cocos. PwC has been trying to recover funds to compensate Bridging investors for potential losses, but has not accused the Cocos of any misconduct. The OSC’s investigation is continuing.
In late December, Coco Paving sent a letter to its employees announcing a transaction with GFL, but added that the deal would not be finalized until the spring of 2022.
BC Partners and GFL have a close relationship. BC was the lead investor in a deal that recapitalized GFL at a $5.1-billion valuation in 2018, and it took GFL public in early 2020. BC remains GFL’s top shareholder, holding 34 per cent of GFL’s subordinate voting shares, according to securities filings, and has two seats on GFL’s board.
Financial terms of the deal to buy Coco Paving have not been disclosed, but a recent comparable transaction exists. In 2018 one of Coco Paving’s largest competitors, the Miller McAsphalt Group, was acquired for $913-million by Colas Group, a French transportation and infrastructure giant. At the time, Miller was particularly active in Ontario and had average annual revenues of $1.3-billion, as well as an average operating profit of 7 per cent, according to Colas.
Coco Paving employs about 3,000 people and owns 34 asphalt plants. In its letter to employees, the company said, “GFL plans to leverage the expertise of the Coco Paving Group to continue to grow its infrastructure business.”
“Please be advised your roles, responsibilities and compensation shall remain as current, and in fact, we expect career growth opportunities shall be presented to many of you, as part of joining forces with GFL,” the letter stated.
Infrastructure assets have become some of the hottest investments to own in recent years. Globally, governments have been spending heavily to stimulate their economies, and institutional investors have been pouring money into the sector, boosting asset prices.
BC Partners, GFL and Mr. Dovigi declined to comment for this story. Lawyers representing the Coco Group, Ms. Coco and Mr. Coco, who goes by Rocky, did not return a request for comment.
The Coco Paving sale coincides with the continuing scandal at private lender Bridging, where hundreds of millions of dollars from 26,000 predominately retail investors have disappeared. In addition to her stake in the company, Ms. Coco was one of eight people who sat on Bridging’s credit committee, which approved loans.
It is unclear whether there is any connection between the paving company’s potential sale and Bridging’s woes. However, the proceeds from the Coco Paving sale will likely draw the attention of Bridging’s receiver. In November, The Globe reported the lender’s investors are expected to lose between $800-million and $1-billion, and last month PwC said investors are expected to lose at least $580-million.
Although the Cocos have not been targeted by the OSC to date, they already agreed to help repay investors for $100-million worth of loans made to a financier named Gary Ng, some of which was used to buy a 50-per-cent stake in Bridging. In late 2019, a financial regulator alleged Mr. Ng had falsified his collateral for these loans.
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