Talks between Bank of Nova Scotia to buy DundeeWealth Inc. hit a roadblock in late October, and only resumed after an "interested third party" came in with an offer, the bank's takeover circular released on Wednesday indicates.
Sources say that the third party was CI Financial Corp., and its bid triggered the hasty $2.3-billion deal by the bank to buy the wealth-management firm controlled by Ned Goodman and his family. CI Financial's executive chairman Bill Holland would not comment.
According to the circular, representatives from Dundee Corp., which owns 48 per cent of DundeeWealth, met with the bank on Nov. 16 and 17 to say it received a bid from a third party but it "was not an offer that Dundee Corp. was willing to accept."
The representatives of Dundee Corp. "explained that they considered the execution risk with respect to an acquisition of DundeeWealth by the interested third party was high, and that in light of consolidation of the Canadian wealth management industry, the bank was the logical acquirer of DundeeWealth," the circular noted.
The execution risk was constituted by Scotiabank's shareholder agreement when it first bought an 18 per cent interest in DundeeWealth in 2007. It had the "right of first offer" that would apply in any bidding situation for the company.
While The Globe and Mail previously reported that CI Financial had waded into the picture with an offer, Scotiabank is rejecting any suggestion that it was pushed into a transaction, and that the deal was the result of off-and-on talks with Dundee Corp. that began in 2007.
"This agreement was the result of a negotiated deal over a period of time," Ann DeRabbie, spokeswoman for Scotiabank insisted on Wednesday. The bank would not comment whether the third party interest had an impact on the timing of the deal.
According to the circular, representatives of Dundee Corp. delivered a term sheet stating the terms under which it was willing to negotiate the sale of its shares of DundeeWealth to the bank.
The two parties entered into a confidentiality agreement on Nov. 18, and came to an agreement that was announced on Nov. 22. During this time, the bank changed its offer to allow shareholders of DundeeWealth to receive cash instead of the bank's preferred shares as part of the transaction.