Canada's Largest Pension Acquires British Lottery Operator

(March 29, 2010) — The Ontario Teachers Pension Plan (Teachers’), Canada’s largest pension plan, has beaten European buyout firm CVC Capital Partners to acquire UK’s national lottery operator, Camelot, in a $576 million deal.

With pension funds increasingly bypassing secondary vehicles, such as private-equity, sector or index funds, to control equity investments independently, the Teachers’ acquisition may signal pension funds’ advantage over private equity. More than half of Teachers’ equity investments are made directly in companies, and other funds, such as the $200 billion California Public Employees’ Retirement System, are propagating the trend, offering vendors the advantage of longer-term ownership.

“As a pioneer in direct investing, and with an excellent global investment track record, we look forward to partnering with management to realize the full potential of the Camelot business over the remaining license term and into the future,” said Wayne Kozun, Teachers’ vice president for long-term equities, in a statement.” Wayne added that as a pension plan, the fund has a long-term time horizon, as it can be 70 years or more from the time a teacher‘s career begins until the last survivor pension payment is made. “We’re known as a patient investor,” he said. Camelot’s five shareholders — Cadbury Plc, Thales SA, Fujitsu Ltd., De La Rue Plc and Royal Mail Group Ltd. — each held a 20% share in the fund and has agreed to sell their stakes. Camelot had been reviewing its options since last year, when some of its shareholders expressed interest in selling, Reuters reported.

According to the England-based lottery operator, the transaction is conditional on approval from Camelot’s regulator, the National Lottery Commission, a process that can take three months. Camelot has run the lottery, one of the most popular forms of gambling in the UK., since in began in 1994, and in August 2007 it beat its only rival, India-based Sugal & Damani Lottery Agency Pvt. Ltd., to retain its license to operate the lottery for another 10 years, according to Bloomberg.

Teachers’ manages $87.4 billion of funds and administers the pensions of 284,000 active and retired teachers in Ontario.