Investment dealer Canaccord Genuity Group Inc. is taking a $367-million takeover offer for RF Capital Group Inc. to the company’s public shareholders and employees, after being rebuffed by its rival’s board and largest shareholder, Winnipeg’s Richardson family.
In a bid to unite two of the country’s largest independent wealth management platforms, Toronto-based Canaccord sent RF Capital’s board a letter last Tuesday offering $2.30 a share for the company, a price 31 per cent above where its shares were trading. The following day, RF Capital’s board turned down the bid, without offering reasons, according to a news release from Canaccord on Monday detailing the previously confidential negotiations.
RF Capital operates under the Richardson Wealth banner, with $30-billion in client assets under management and 19 offices across Canada. The Richardson family’s private holding company, Richardson Financial Group Ltd. (RFG), holds 44 per cent of Toronto-based RF Capital. The remainder is owned by RF’s investment advisers, current and former employees, and public shareholders. The company was formerly known as GMP Capital Inc.
By making its offer public, Canaccord is trying to get these shareholders to push for a deal. Canaccord has $88-billion of client assets under management, an increase of $32-billion over the past five years.
“We are disappointed that we have been unable to engage with RF Capital’s board of directors and the Richardson family in a meaningful and productive way,” Canaccord chief executive Dan Daviau said in the news release. Canaccord has been trying to hold talks with RF Capital since last September, and the Richardson family rejected an invitation to discuss the offer, according to the release. Mr. Daviau said Richardson Wealth’s advisers “would benefit from the scale, stability and growth potential that Canaccord Genuity provides.”
In response to Canaccord’s release, RF Capital said on Monday that its board slammed the door on talks, “having unanimously concluded that the proposal was not in the best interest of the company’s shareholders, advisers, clients and other stakeholders.”
In another release, RFG chief executive H. Sanford Riley said: “We believe that RF Capital is embarked on a strategy that will generate far more shareholder value than a transaction with Canaccord would. RFG’s shares are not for sale because we believe in the long-term vision for RF Capital and Richardson Wealth.”
Canaccord is pitching a deal at a time when its wealth management arm is expanding and its stock price is rising, while RF Capital is coming out of a two-year restructuring and has seen its share price slide. Last month, long-serving Richardson Wealth CEO Andrew Marsh announced plans to leave the firm at the end of March.
Last October, RF Capital reworked its ownership, with its investment advisers swapping their stake in a private subsidiary for shares in the publicly traded parent. The transaction valued the advisers’ RF Capital shares at $2.42 each, but the stock has continued to trade well below that price. In its news release, Canaccord said the board’s refusal to engage in talks prevents RF Capital advisers from cashing in on “significant value for their shares accumulated over many years of service.”
Over the past three years, Canaccord recruited 45 teams of investment advisers who oversee $11-billion, including 14 teams from Richardson Wealth, with $3-billion in assets. Canaccord also said that, over the past decade, it has invested $350-million in acquisitions and technology to support its wealth management platforms in Canada, Britain and Australia.
Last month, Canaccord raised the equivalent of $210-million by selling a 22-per-cent stake in its British wealth management business to HPS Investment Partners LLC, a New York-based fund manager. Last Friday, S&P/TSX Composite Index administrators announced that Canaccord is joining the index, effective March 22.
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