Forget about a competing bid for Sceptre Investment Counsel Ltd. .
Scotia Capital Markets analyst Phil Hardie doesn't foresee a mutual fund company wading in with a rival offer to that from Fiera Capital Inc. "Acquisitions in the institutional space differ from those in the mutual fund sector in that hostile bids are highly unlikely," he wrote in a report released Thursday. See Globe story on Sceptre-Fiera deal.
But Sceptre shares should have near-term support at $6.60 per share because Fiera's minority investor and former BCE chief executive officer Jean Monty plans to acquire 833,333 shares of the merged entity, Fiera Sceptre, at $6 per share, Mr. Hardie said. (This proposed $5-million purchase was struck before the announcement of the agreement to merge the two institutionally-focused money managers.)
Mr. Hardie calculates that Fiera's offer effectively represents a 27-per-cent premium to Sceptre's June 15 closing price of $5.20 a share, and estimates that Fiera paid roughly $79.5-millon for Sceptre.
The analyst, however, upgraded his rating on Sceptre to "sector perform" and raised his target price to $7.50 a share to reflect an improved outlook for Sceptre. The investment firm will now get the much-need scale from a combined publicly traded firm that will manage $30-billion in assets, he said.
Sceptre could have fetched a higher price from a mutual fund company in better times to implement a strategy of migrating the institutional money management expertise into retail offerings.
"We believe that a retail-focused asset manager could have paid up to $8.50 per share, but circumstances and industry conditions have changed," said Mr. Hardie, the only analyst covering Sceptre.
"With that said, Sceptre's mutual fund performance has not generated industry-leading relative returns, and both its mutual fund and private client businesses have experienced a prolonged trend of net redemptions, which does not likely bode well in garnering full value. Given the current environment and challenges facing the retail fund industry, we believe that very few - if any - retail-oriented asset managers would look to execute this type of asset migration strategy."
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