National Bank of Canada is expanding in wealth management by purchasing Wellington West Holdings Inc., a mid-sized brokerage based in Winnipeg, in a deal that values the firm at $333-million.
The acquisition sees National, which already owns almost one-fifth of Wellington, buy the rest of the firm in a bid to expand its operations outside of Quebec.
The acquisition will increase National's financial adviser force by 223 to 983, and give the firm an added presence in Western Canada. After the deal closes, National Bank will get about half its retail brokerage revenue from outside Quebec. The purchase will also significantly bulk up National's securities division by adding about 30 bankers, analysts and traders.
The Globe and Mail reported several weeks ago that the two sides were in advanced discussions on a buyout of Wellington, an investment adviser that began as a boutique firm in the nineties and has since expanded across the country.
The deal comes as smaller investment firms feel the pinch of lower trading volumes and shrinking margins, forcing consolidation among brokerages. National Bank, Canada's sixth-largest bank, has surplus capital on hand after stockpiling funds during the financial crisis and told shareholders at its annual meeting on Wednesday that it expects to be making acquisitions in the months ahead.
National, bought 12.5 per cent of Wellington West in 2008 for $35.8-million, valuing the firm at about $287-million at the time. It later increased its holding through an option to buy up to 5 per cent more of the privately held shares.
In a March interview, chief executive officer Louis Vachon said the bank wanted to increase its wealth-management capabilities across Canada. "Would we have an interest in Wellington West? I think the answer is yes," Mr. Vachon said. "Otherwise I don't think we would have become a minority partner."
Wellington's revenue has bounced back after the financial crisis, but its profit still lags where they were a few years ago - a sign of the times for the sector. Revenue was $154-million in the most recent fiscal year ending June 30, 2010, up from $134-million in 2007. However, the company posted a small loss last year, compared with a profit of $7.8-million in 2007.
Grant Robertson