CI Financial Corp. plans to chart its own course now that Bank of Nova Scotia , its biggest shareholder, is no longer interested in buying the 62 per cent of the wealth management firm it doesn't own.
Scotiabank recently acquired DundeeWealth Inc. after exercising its right to match a formal deal negotiated by CI Financial to buy the company for $2.3-billion. CI Financial had offered one share of CI Financial for one share of DundeeWealth.
"We did get a nice break-fee out of this transaction even if we did not get the company," CI Financial chief executive officer Stephen MacPhail told analysts during a conference call on Wednesday. "After all our expenses, including fees to our advisers, it netted CI almost $4-million."
Scotiabank acquired its 38-per-cent stake in CI Financial from Sun Life Financial Inc. in 2008, and its 18-per-cent interest in DundeeWeath in 2007. Until last November, there had been much speculation about how the bank might acquire one or both of the wealth management firms.
CI Financial is still on the acquisition trail and is willing to look in the United States for ways to expand the company, Mr. MacPhail said. "The number of options in Canada continue to be more limited."
The prospects would be smaller or boutique-like companies focused on areas such as hedge funds or other alternative investments, rather than a large mutual fund company, he added.
Mr. MacPhail said that during a discussion with Scotiabank executives in early December, he was "surprised" to learn that the bank was only interested in owning 100 per cent of DundeeWeath, and not CI Financial at all.
"What that has forced us to do is really re-look at where we are going" after spending more than two years figuring how to do a deal involving the three companies, Mr. McPhail said. "It took up a tremendous amount of our mental time in calculations, and enough models probably to sink a ship."
Scotiabank has definitely "lost interest in our business," he said.
"From CI's perspective, we've had to conclude as a result of that meeting that we are going to plot our own course going forward."
CI Financial has a poison pill in place that prohibits Scotiabank from selling its 38-per-cent stake as one block, Mr. McPhail added. "If they wanted to sell their shares, the only way they could do it would be to sell it in pieces of less than 10 per cent."
The bank also cannot sell shares without CI shareholders' approval, he said. "They can sit as a passive shareholder for a long time. That doesn't bother us at all … We are just moving forward with our own plan knowing that, if they really wanted to do something, it's really got to be in the context of all CI shareholders and just Scotia shareholders."
Mr. MacPhail made the comments after CI Financial announced an increase in its annual dividend to 90 cents a share from 84 cents, and reported that its fourth-quarter profit fell 20 per cent from a year ago because of higher tax expenses.
The company reported a profit of $91.4-million, or 32 cents a share for the quarter ended Dec. 31, compared with a profit of $115.8-million, or 40 cents a share, a year earlier. Revenue for the quarter rose to $367.2-million from $335.5-million a year ago. Retail assets under management rose to $71.8-billion from $62.8-billion.
CI Financial (CIX)
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