When a firm shares a name with the mythical multi-headed hound of the underworld you can be pretty sure it has an unusual approach to its investing.
That's certainly true of Cerberus Capital Management LP. The New York-based Cerberus has built up a lot of experience dealing with struggling companies since it was founded just over 21 years ago. The firm specializes in distressed assets and securities, private equity investments (with or without a controlling interest) and real estate. Currently the fund has more than $20-billion (U.S.) in assets under management.
The private equity investor is also reported to be sniffing around the BlackBerry Ltd. auction, looking to sign a non-disclosure agreement and gain access to the smartphone maker's confidential documents, according to sources interviewed by The Globe. That could put the buyout firm in competition with Fairfax Financial Holdings Ltd.'s $4.7-billion offer.
Whether or not Cerberus would bite at BlackBerry remains to be seen, but the firm did recently raise $2.61-billion for a new private equity fund, according to a report from Reuters.
Plus, the firm is no stranger to Canadian investments and certainly isn't afraid of a fight. Here is a breakdown of a few of the most significant investments involving Canada:
In 2003, when Cerberus had just $8-billion in assets under management, the so-called vulture fund began amassing Air Canada debt, which it later sold to pursue an equity stake in the company. It went head to head with businessman Victor Li to be the lead equity sponsor as the airline underwent a restructuring process. After Air Canada chose Mr. Li's $650-million (Canadian) investment – giving him 31 per cent of the company's shares – Cerberus made other unsolicited offers and went to an Ontario court to reopen the bidding. The two continued to battle for the stake, but Mr. Li eventually won out.
But then Mr. Li walked away from the deal in March of 2004 after being unable to come to an agreement with Air Canada's unions over pensions. Cerberus was still hanging around, so Air Canada agreed to take a $250-million investment from the investor. That's how Cerberus became the largest shareholder of the airline's new parent company ACE Aviation Holdings Inc. That holding company is now winding down, though, and Cerberus has gradually sold down its holdings.
In 2003 Cerberus also acquired Montreal-based Teleglobe Inc. out of bankruptcy protection. Teleglobe was struggling to turn its long-distance carrier business into a more modern international telecommunications company that had voice, data and mobile capabilities. It was largely owned by BCE Inc. at the time.
Teleglobe was saddled with upwards of $6-billion in debt, though, and was laying off half of its 1,600 employees. Together with another firm, Cerburus paid $155.3-million (U.S.) for the company. In a case study on its website, Cerberus says Teleglobe had "been slow in adapting from a national long distance carrier to an international telecommunications services provider."
Cerberus put a new management team in place. It also bought a wholesale voice over Internet protocol (VoIP) provider called Internet Telephony Exchange Carrier Corp. (ITXC) in 2004, which it combined with Teleglobe to create a major global carrier of international calls. After adding new services and cutting costs, Cerberus sold the company for $239-million to a subsidiary of Indian conglomerate Tata Group in 2005.
Cerberus led a group of co-investors that took an 80-per-cent stake in Chrysler Group LLC for $7.4-billion (U.S.) in 2007, leaving DaimlerChrysler AG with just under 20 per cent of the company.
But the auto maker filed for bankruptcy protection in 2009, and Cerberus lost control as the U.S., Canadian and Ontario governments stepped in to cover the bailout. It forfeited both its equity stake and the $2-billion in debt that it owned.
At the time, it seemed like a colossal loss, but Cerberus held on to Chrysler Financial Corp., the auto company's lending arm, until it was sold to Toronto-Dominion Bank for $6.3-billion in 2011.
In a case study on its website, Cerberus says "the lending company's equity nearly doubled from 2009 to 2010" and that it retained more than $1-billion in other assets related to Chrysler after the sale to TD.
(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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