Pension fund giant Caisse committed to SNC-Lavalin despite challenges - InfoNews

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Pension fund giant Caisse committed to SNC-Lavalin despite challenges

January 29, 2013 - 1:25 PM

MONTREAL - Canadian pension fund giant Caisse de depot says it will continue to support SNC-Lavalin because it foresees the engineering firm's potential of becoming a "true global leader" once it gets over its current problems.

"I know now that SNC is tarnished because of what's happened but you can't lose the forest through the trees," Caisse CEO Michael Sabia told reporters Tuesday during a discussion of its new strategy to shield itself from market volatility.

"As a long-term investor, we're convinced that we're going to deliver value for our depositors and at the same time, help build a legitimate potential world leader in that sector."

Sabia said the Caisse would have likely sold its stake in the Montreal-based company had it not been convinced of SNC-Lavalin's (TSX:SNC) potential to become one of the few Quebec and Canadian firms that have a "legitimate claim to be a world leader."

He said new CEO Robert Card is starting to make decisions to move on from the ethical breaches of some former employees, which included millions of dollars in payments to unknown agents and alleged $160 million in bribes to the family of deposed Libyan dictator Moammar Gadhafi.

"Those are serious difficulties for sure. We're very focused on that but our perspective on this is this is a time when a long-term investor like the Caisse needs to help that company build a bridge to a different future."

Sabia said the Caisse has the same long-term positive outlook about its investment in home renovations retailer Rona (TSX:RON).

He said the company decided long before the hostile bid from Lowe's to increase its stake in the company and didn't act because of some "red phone call" from its political masters ordering it to do so.

"This is nonsense," he said angrily in a boardroom overlooking downtown Montreal.

"We started building a position because we thought that the company had potential... and frankly the Lowe's offer was so far below what we think the value creation potential of that company is we weren't comfortable with the offer."

Sabia said the Caisse increased its stake in Rona to 15 per cent to send a message that there was no way the company would be sold at that price.

"But we did that on the basis of our work analyzing this business down to the God-damned nuts and bolts," he said.

Working with fellow shareholder Invesco, the Caisse pushed for changes to the board, including the appointment of an experienced chairman.

The Caisse plans to take a more active role in its investments, where appropriate, especially involving companies in Quebec. But CGI (TSX:GIB.A) is a case where it sees no need to act because the IT firm's management is solid and its prospects are so bright.

Intensifying its internal expertise to evaluate the potential of sectors is part of its strategy to increase private investments to generate stable long-term returns.

It recently launched a Global Quality Equities portfolio that will hold about 10 per cent of its investments in about two years.

The portfolio contains investments in big name companies such as Nestle and Heinz valued at a "few hundred million dollars."

But the Caisse plans to expand that to about $15 billion by the end of 2014 to give its depositors increased exposure to stable returns.

News from © The Canadian Press, 2013
The Canadian Press

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