Ontario Teachers’ Pension Plan has agreed to acquire Cenovus Energy’s wholly-owned subsidiary, Heritage Royalty Limited Partnership (HRP), for $3.3 billion.
Calgary-based HRP has about 40 employees and holds a broad portfolio of oil and gas royalties in Western Canada.
Royalty property cash flows are correlated to the price of oil and natural gas, which Teachers’ says will provide its investment portfolio with diversification benefits and a hedge against unexpected inflation.
“HRP has strong assets and operating partners generating recurring revenues that are an excellent fit with Teachers’ need to pay pensions for the long term,” says Ziad Hindo, senior vice-president, Teachers’ Natural Resources Group and tactical asset allocation. “This acquisition provides an attractive risk-return valuation and complements our investment approach, which is shifting to more direct and diversified energy sector holdings.”
The deal expected to close by the end of July, subject to receipt of customary regulatory approvals.