Scott Tannas Aiming For A Repeat Of Western Financial Group

March 7, 2018

By: Barry Critchley, Financial Post

The senator’s new public company, the Western Investment Company of Canada, started 18 months ago as a capital pool company and recently completed its fourth acquisition

Scott Tannas, a High River, Alberta-based entrepreneur has already hit the cycle — start a small business, grow it and then sell it for a substantial return — and seems intent on doing it again.

Tannas, also a member of the Canadian Senate, has a new public company, the Western Investment Company of Canada, which started 18 months back as a capital pool company and recently completed its fourth acquisition, the purchase of a controlling stake in Foothills Creamery. Together with co-investor ATB Capital, Western has a 90 per cent stake in the 60-person operation, which produces butter and premium ice cream.

“Yes sir, I am back at it,” Tannas said Wednesday, about seven years after he sold his former creation, the Western Financial Group, to Desjardins Financial for $440 million. In Feb. 2017, Desjardins sold most of WFG to Winnipeg-based Wawanesa Mutual Insurance, for $770 million with Economical Insurance purchasing WFG’s pet insurance business.

“That was a wonderful experience for me,” said Tannas, who started WFG with a one-office brokerage firm (Hi-Alta Capital), in his hometown and built the company through a series of acquisitions largely in financial services, particularly insurance, and also in banking. In 2002, WFG formed Bank West, the country’s first chartered bank in more than 30 years.

And it was also a wonderful experience for the shareholders: those who bought in the IPO and sold to Desjardins 15 years later posted a 11-bagger meaning $1 was turned into $11.

Under the terms of WFG’s sale to Desjardins, Tannas is restricted in the types of business he can purchase. “I have made a commitment, both moral and legal, that I wouldn’t compete directly with Western Financial Group. But there are lots of opportunities in the insurance business that aren’t retailing of insurance, including specialty underwriting. We haven’t found anything yet.”

But Western Investment has made four acquisitions: in late 2016 it bought GlassMasters Autoglass; in August 2017 it invested $5 million for a 30 per cent stake with Saskatchewan-based Golden Health Care, that province’s largest seniors care provider; and late last year it acquired a 75 per cent stake in Ocean Sales Group Ltd., an exhibition retailer. It has been to the capital markets raising $12.5 million of equity.

“They are all good businesses and there is a ton of companies in the $15 million – $50 million value range. There is so much opportunity if you are an optimist,” said Tannas, who plans to own the investments for the “long run,” which makes it different from most private equity firms where the sale process kicks in after about five years.”

Once a business is acquired, Tannas implements a governance program and business planning program, “the discipline needed,” for the companies to grow.

Tannas plans to build a portfolio of 10-15 companies over the next few years. “We are tiny but we will grow and be a big company one day,” said Tannas, 56, who was asked whether he has enough time.

“I still have have lots of energy, and I love being in the rhythms of business. I don’t want to lose that because it makes me a better senator.”

Some market participants are skeptical arguing it’s tough to create value from buying a group of disparate businesses with seemingly no synergy between the investments. “Where will the lift come from,” noted one broker.

So what’s different second time round? Apart from being “more patient,” Tannas said it’s similar because he is purchasing “founder-led companies,” where the former principals want to stay involved. “The listening skills, trying to find the right fit for the founder, become important.”

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