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CI Financial Corp. CIX-T is spinning out its U.S. wealth management operation with plans to sell as much as 20 per cent of the division in an initial public offering.

The investment giant, which manages about $370-billion in client assets, announced Thursday that it intends to submit an application this year to the U.S. Securities and Exchange Commission to launch an IPO for its U.S. wealth business, which now accounts for more than half the company.

CI will remain the majority shareholder and said in a release that it currently has “no intention of spinning out or otherwise divesting” its remaining ownership interest. Proceeds of the IPO will be used to pay down debt.

The company has spent the past several years trying to restore its stock price, which at times has plummeted more than 45 per cent from its peak in 2014. Chief executive Kurt MacAlpine, who stepped into his role in 2019, has been busy implementing a new turnaround strategy that includes boosting CI’s presence in the U.S. market.

Throughout the pandemic, the financial services company has been on an acquisition spree, buying more than 25 registered investment adviser firms in the U.S. since January, 2020. Eight of those deals closed in the last quarter.

Once all outstanding acquisitions are completed, CI’s U.S. wealth management assets will total about US$133-billion – more than twice the assets of the Canadian wealth business, which were about $80.6-billion at the end of 2021.

Mr. MacAlpine said the steady growth of the U.S. business has positioned it with “sufficient scale to stand alone as a public company.”

“The growth in our U.S. wealth management business is incredible; however, in our opinion, the value we have created isn’t reflected in our share price today,” he said in a statement.

“After a thorough evaluation of our strategic options, we are confident that a U.S.-listed subsidiary IPO is the best route to shareholder value creation.”

Bank of Nova Scotia analyst Phil Hardie said in a research note that the IPO transaction is positive, providing an “avenue to better reflect the value of CI’s U.S. Wealth Management business.”

Mr. Hardie believes the spun-off U.S. business could trade at an enterprise value – or market capitalization plus net debt – of 9.5 to 12.5 times its earnings before interest, taxes, depreciation and amortization (EBITDA), similar to the valuation of U.S. wealth manger Focus Financial Partners, which launched an IPO in 2018.

Parent CI Financial currently trades at less than six times EBITDA, he said, with the shares having fallen 40 per cent from their November, 2021, high.

The company has not yet determined the size and timing of the IPO but said it will be subject to market conditions.

With files from David Milstead

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