French bank Natixis SA is selling its stake in Canadian asset management firm Fiera Capital Corp., cutting ownership ties despite what the two companies called “a long-term strategic partnership” forged between them only two years ago.
The bank’s Natixis Investment Managers unit is selling all of its 10.68 million class-A shares in Fiera through two separate agreements expected to be settled Friday, Fiera said in a statement. Natixis said in a separate statement that it will receive total proceeds of roughly $105-million for its 10.2-per-cent stake, minus commissions and transaction fees. With its withdrawal, it will no longer have any right to propose nominees to Fiera’s board.
Fiera shares fell as much as 5.5 per cent in Thursday trading on the Toronto Stock Exchange from their previous close. They ended the day down 4.6 per cent at $10.24.
Natixis bought into Fiera for $128-million in 2019 as part of what the companies billed at the time as a “long-term strategic partnership,” which included cementing Fiera as Natixis’s biggest platform for the distribution of its investment products in Canada. The distribution agreement will continue under its initial five-year term even after Natixis’s stock exit, the companies said.
“We have a strong and productive distribution partnership with Fiera, but owning an equity stake is not necessary for our mutual success,” Natixis spokesman Ted Meyer said via e-mail. “Our investment was part of a broader deal with Fiera and helped to align our firms’ interests at the onset of our partnership. After working together for 2.5 years our relationship is now well established.”
Monetizing the Fiera stake gives Natixis more flexibility to direct capital to emerging growth opportunities, Mr. Meyer said. He said the decision was unrelated to Fiera’s recent leadership change.
Montreal-based Fiera announced last week that its founder and chief executive officer, Jean-Guy Desjardins, would move into a new role as executive chairman after 18 years at the helm. Jean-Philippe Lemay, Fiera’s global president and chief operating officer, was promoted to CEO.
“While the Natixis divestiture significantly and prematurely changes a strategic partnership, the distribution agreement that establishes Fiera Capital as Natixis’s preferred Canadian distributor for its investment strategies will remain in force,” Barclays analysts John Aiken and Aria Samarzadeh said in a note. The pact leaves open avenues of distribution for Fiera in international markets while continuing to strengthen its domestic business, the analysts said.
Fiera struck a private deal with Natixis to repurchase for cancellation a block of 3.56 million shares for about $35-million. That should help ease the pressure on the share price caused by the unloading of such a significant block of stock, the Barclays analysts said. The rest of Natixis’s holding is being sold to RBC Capital Markets in a block trade. In such privately negotiated transactions, an investment bank typically buys a large block of shares it then breaks up into smaller parcels sold to other buyers.
Mr. Desjardins created Fiera in 2003 through the purchase of Desjardins Group subsidiary Elantis Investment Management and built it through acquisitions, notably Foresters Asset Management Inc. and Integrated Asset Management Corp. It had about $180-billion in assets under management at last count.
The company’s share price has not climbed in tandem with that growth – a fact Mr. Desjardins has admitted he can’t explain. “I don’t have the real answer,” he told Montreal’s La Presse in a recent interview.
One theory is that the company is not part of the TSX Composite Index, which means its shares aren’t part of index trading. The company’s $1.1-billion market capitalization and its daily trading volumes are not high enough for inclusion in the index, Mr. Desjardins said.
While many Canadian asset managers have benefited from the billions in pandemic savings investors injected into retail mutual funds, Fiera has not profited as much as some of its peers, given the company’s limited exposure to the Canadian retail segment. In 2018, Fiera sold its retail mutual fund family, which consisted of nine funds and approximately $800-million in assets under management, to Canoe Financial LP for an undisclosed amount.
Fiera took on a significant amount of debt for its acquisition spree and posted losses from 2018 to 2020 after recording significant restructuring and merger-related expenses. The company reported $369-million in long-term debt at the end of 2017, according to company financial statements. That jumped to more than $640-million as of December, 2020.
Management is now working to pay down that debt through various measures such as cost containment, Mr. Samarzadeh said. The company has maintained its dividend while also repurchasing shares, he said.
With a file from David Milstead
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