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A special committee of Canaccord Genuity Inc.’s CF-T board of directors has said a bid to take the independent Canadian investment bank private is too low, after a group of the company’s senior leaders officially launched the takeover attempt early Monday.

More than 50 members of the company’s management team, including chief executive Dan Daviau and board chair David Kassie, first announced plans last month to collectively launch the takeover bid, for $11.25 a share. The management group’s offer values the company at roughly $1.13-billion, despite a subsequent valuation prepared by Royal Bank of Canada RY-T for the special committee that found Canaccord to be worth significantly more.

While the offer price represents a nearly 42-per-cent premium over the 20-day average price of Canaccord’s stock as of Jan. 6 – the last trading day before the management group announced its intention to take the company private – it is roughly 32 per cent below Canaccord’s November, 2021, value of $16.52 a share. Canaccord stock has been consistently trading above the proposed offer price since the planned takeover bid was made public on Jan. 9, suggesting investors expect the initial offer price to rise.

Last month, the special committee of Canaccord’s board of directors said it was not prepared to accept an offer of $11.25 a share, based on RBC’s preliminary analysis. The committee, which is composed of four board members who are not part of the management group behind the proposal, said in a statement Monday that the bid “undervalues the company” and that “there is greater value” in Canaccord “than is reflected in the offer price.”

The committee has engaged Barclays Capital Canada Inc. to explore potential strategic alternatives, the statement said.

According to RBC’s now-completed analysis, the fair market value of Canaccord’s stock as of Feb. 15 was between $12.75 and $15.75 a share. That suggests the company is worth between $1.27-billion and $1.56-billion.

The midpoint of that range is $14.25 a share, implying a valuation of $1.42-billion, or nearly $300-million more than the management group is offering – though the group claims RBC’s valuation range is “highly theoretical, unrealistic and flawed.”

RBC used a “sum of the parts” methodology that values Canaccord’s various business units as if they could be sold off individually, the group said in a statement. The valuation of Canaccord’s Canadian wealth management business in particular, the group said, “demonstrates a significant misunderstanding of the inherently integrated nature of the wealth business with the Canadian capital markets business.”

The offer price of $11.25 a share is based on a fairness opinion prepared by Raymond James Ltd. on behalf of the management group behind the bid, though the group has acknowledged that the opinion does not meet the legal standard of a formal valuation. Because Raymond James was hired by the bidder and not by Canaccord itself, it cannot be considered independent, as securities law requires.

Canaccord’s special committee, meanwhile, is standing by RBC’s math. The special committee’s statement referred to RBC as a “highly credible investment bank qualified to provide an independent valuation” and said that the committee itself “disagrees with the management group’s comments regarding RBC’s valuation.”

The special committee intends to publish a directors’ circular within the next 15 days that will, among other things, provide a more detailed response to the management group’s criticisms of RBC’s valuation methodology.

Collectively, the management group holds slightly more than 21 per cent of Canaccord’s common shares. Including the roughly 11 per cent held by outside shareholders who have signed deals to support the bid, the offer currently has support from investors holding nearly one-third of Canaccord’s common shares.

But 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.

The management group said Monday that “over 150 additional employees have expressed a desire” to join the more than 50 who are already part of the takeover bid.

The offer, for which New York-based HPS Investment Partners LLC has agreed to provide up to $825-million in financing, will remain open until June 13, the group said. But that date can be altered at the group’s discretion.

Follow Jameson Berkow on Twitter: @JamesonBerkowOpens in a new window

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