Bags of salt await use in Toronto's Union StationFred Lum/The Globe and Mail
Kissner Group has grown through a series of three recent acquisitions into one of Canada's biggest privately held companies after deciding to go it alone rather than selling to private equity.
The company has become what it says is the biggest maker of specialty ice melter in North America, and this week it inked another deal, this time to buy a salt miner. The purchase of Detroit Salt gives Kissner a company that specializes in bulk road salt for the Great Lakes and the Northeastern U.S.
David Safran, Kissner's chief executive, talked to Streetwise about the choice to pass on private equity, Kissner's growth and why private companies could be the answer to Canada's search for corporate champions.
If Mr. Safran's name rings a bell on Bay Street, it's because he was a mergers and acquisitions banker, most recently at National Bank Financial, before going to work at Kissner.
Streetwise: Who is Kissner?
Mr. Safran: It's an exciting story. It's a Canadian company that's really becoming a big player in North America. When you look at the ROB 350 list of the biggest private companies, and you take out Canadian arms of foreign companies, and you look at true Canadian-owned or Canadian-controlled companies, I had us at No. 14. Directly and indirectly, we have well over 400 people working for us and it's a very nice business.
Streetwise: Kissner looked at selling to private equity, but decided to stay independent and grow on its own. Why?
Mr. Safran: I had the mandate to work with the owner of the company [Bill Zinger]and find him some growth capital. All the private equity funds in Canada were interested.
But in order to get the interest of private equity, you have to demonstrate how you can double the business in the next three to five years. I worked with him to put the plan together, and he said "forget the sale, why don't you just come do this for me."
Private equity really wants to tie the owner to the business and keep the owner active in the business after the sale. Bill sat there saying I could sell my business for a significant amount of money, but his real issue is he wants to work his way out of the business. That was his pressure point that really wasn't addressed through a private equity solution. He thought well, I can hire a CEO and benefit from the upside myself. I have the risk appetite.
Streetwise: What is the background of Kissner? Most people probably haven't heard of it.
Mr. Safran: The history is that it was a milling company in the Kitchener, Ontario, area. About 13 years ago, Mr. Zinger bought it from the Kissner family. He turned it into a distribution company. One of the products was ice melt, which was a unique product and really gaining traction. He decided he needed to produce the product. He has really driven the business from 50,000 bags per year to millions of bags per year. The big customers are commercial -- landscapers and janitorial-sanitation companies.
Streetwise: How have you found raising capital from banks or otherwise as a private company?
Mr. Safran: Kissner was completely unleveraged. The typical philosophy of a private owner is not to have any leverage. But it's a sizeable business and banks are willing to lend. The lending market has improved significantly, and banks are looking for deals. All the banks were scrambling to finance this deal. They all wanted a part of it.
This particular business isn't tied to any economic cycle. It's a need to keep your walkways and your roadways clear of ice and snow.
You've had a combination of factors that really have grown this market. The litigiousness of society has increased, so you need to protect against slip-and-fall claims. There's been significant urban sprawl with the housing boom. That has extended the roadways, which has significantly increased demand for de-icing products.
Streetwise: You're a believer that Canada's private companies have a chance to create champions, perhaps more so than public companies. Why?
Mr. Safran: As a private company you can make your decisions much faster, and move on a dime. When you see companies like Potash Corp. of Saskatchewan Inc. being acquired, there are the arguments about whether it should or should not be sold. But I think we'd have a lot more Canadian champions if there were more, larger private companies.
In Canada [public companies]don't really have the just-say-no defence to a takeover. The board has a fiduciary obligation to explore transactions, and take it to the shareholders and have them vote on it, which I think has had a detrimental impact on the business landscape in Canada.
(This interview has been edited and condensed.)