CPPIB's Minority Acquisition of Octopus​

By Jake Rickman​

What do you need to know this week?

One of the largest pension funds in the world, Canada Pension Plan Investment Board ("CPP Investments"), has acquired a $300m equity stake in Octopus, the British energy group.

The $300m investment is equivalent to a 6% ownership of the start-up energy generation and supply company. The total value of Octopus is estimated to be $5bn but the company has not yet turned a profit.

CPP Investments' acquisition will help Octopus fund its 'Kraken' platform, which is a technology platform designed to facilitate the efficient supply of energy to Octopus’ customers. A portion of the funds has also been allocated to the company’s renewable energy generation.

The investment reflects confidence in a company at odds with its peers, given that over two dozen energy suppliers in the UK have ceased trading in the past three months because of spiking energy prices.

Why is this important for your interviews?

This topic brings together two interesting commercial threads that you can weave together in your interviews.

First, it is significant that an energy company has attracted the attention of outside investors in the context of a wider sector that is experiencing an existential crisis. CPP Investments is not the only recent investor: Generation Investment Management, largely owned by former US Vice President Al Gore, acquired a $600m stake in the company earlier this year.

Second, you may be aware that pension funds have long been a major source of money in the both the public and private markets. However, CPP Investments has a reputation for actively managing its own money, which makes it an anomaly compared to other pension funds that prefer to have other private equity companies like Carlyle or Cinven invest their money.

Being able to explain to interviewers that you can discern certain market mavericks like CPP Investments will demonstrate you have a keen understanding of important market figures.

How is this topic relevant to law firms?

This is one example of a “minority” private equity investment, which is where a company acquires a stake in a company representing a portion of ownership of less than 50%.

Such deals get less attention than the headline-grabbing deals of history like KKR’s leveraged buyout of RJR Nabisco. Nonetheless, they make up a significant proportion of deals for corporate law firms.

They also raise unique strategic and commercial concerns, particularly because minority shareholders have fewer rights than majority shareholders. Law firms like Freshfields Bruckhaus Deringer and Kirkland & Ellis have previously helped CPP Investments achieve minority stakes in target companies.