Acquiescing to a major shareholder’s demands, the Canaccord Genuity Group Inc. CF-T board members who had been evaluating an insider bid to take the independent Canadian investment bank private have quit.
Gillian Denham, Dipesh Shah, Charles Bralver and Sally Tennant have all resigned as directors of the company, Canaccord announced early Monday. The four had previously comprised a special committee evaluating a takeover bid worth $11.25 per share, or about $1.1-billion, from more than 50 members of Canaccord’s management team.
The resignations come just days after Skky Capital Corp. Ltd, which owns an 8.8-per-cent stake in Canaccord, publicly called for the special committee to be replaced. Skky, a Bermuda-based fund manager controlled by Canadian financier Gordon Flatt, said on March 7 that it had “lost confidence” in the special committee after it rejected the management group’s offer as too low.
At the time, the committee cited a formal valuation by Royal Bank of Canada that found Canaccord was worth between $12.75 and $15.75 per share. The committee also hired Barclays Capital Canada Inc. to explore potential alternatives. The midpoint of that range is $14.25 per share, implying a valuation of $1.42-billion – almost $300-million more than the management group is offering.
In their resignation letter, the four directors said the breakdown with management and others through the course of the bid had become “irreparable.”
Skky has an agreement with the management group requiring the fund manager to support the $11.25-per-share bid and oppose all others, even if another offer were to emerge at a higher price. That agreement dates back to August, 2022, despite Mr. Flatt having sent a letter around the same time stating his belief that Canaccord was in fact worth more than $15 per share.
When the management group, which includes chief executive Dan Daviau and board chair David Kassie, first announced plans to launch a go-private bid in early January, it referenced support from Canaccord’s “largest independent shareholder.” Skky, however, was never specifically mentioned.
RBC’s valuation used a “sum of the parts” methodology that is “highly theoretical, unrealistic and flawed,” the management group has said, because it values Canaccord’s various business units as if they could be sold off individually. The offer price of $11.25 per share, meanwhile, is based on a fairness opinion prepared by Raymond James on the management group’s behalf, though the group has acknowledged that the opinion does not meet the legal standard of a formal valuation.
In its call for the special committee’s removal, Skky requested Terry Lyons, 73, a former executive at Brookfield Asset Management who had previously spent 18 years on Canaccord’s board, be reappointed as a director.
At a meeting Sunday, the remaining four members of the board voted to bring Mr. Lyons back. He will join venture capitalist Michael Auerbach on a reconstituted two-person special committee that will continue evaluating the management group’s offer.
The previous special committee had intended to publish a detailed response to the management group’s offer in the form of a directors’ circular by March 14. The new special committee has asked securities regulators to allow for the circular publication to be delayed, though it did not specify how much more time would be requested.
Investors representing at least 75 per cent of Canaccord’s total common shares must agree to sell in order for the go-private transaction to be completed.