GMP Capital Inc. is urging shareholders to back its bid to buy wealth manager Richardson GMP Ltd. rather than support its former chief executive officer and a Toronto-based hedge fund in their attempts to block the deal.
In a letter to investors on Wednesday, GMP Capital’s board chair Don Wright addressed the opposition from some of its shareholders to the company’s offer to buy Richardson GMP Ltd. (RGMP).
“You should be wary of any attempt by opponents of the RGMP transaction to single out certain terms that they dislike while ignoring the overall balance that the special committee negotiated,” Mr. Wright said in the letter. “You should be skeptical of claims that the [opposing parties] can negotiate better terms or distribute more capital to common shareholders.”
RGMP is jointly owned by GMP Capital, the Richardson family and its investment-adviser employees, who manage about $28-billion in assets.
After GMP Capital sold its capital markets division last year, it announced a long-awaited plan to purchase the 67-per-cent stake of RGMP it did not already own. That proposal is up for a vote on Oct. 6. To pay for the acquisition, GMP Capital would issue about 107 million shares, worth about $188-million.
Anson Funds - which owns about 6.5 per cent of GMP Capital - said on Thursday it would vote against GMP Capital’s proposed offer because it “strips GMP of its cash resources to the detriment of minority shareholders."
Kevin Sullivan, co-founder and former CEO of GMP Capital, said last Friday he too opposes the deal and plans to nominate a new board of directors for GMP Capital. Mr. Sullivan, who says he holds a 4-per-cent stake in GMP Capital, has not yet publicly released that proposal.
Both Mr. Sullivan and Anson Funds declined to comment.
If the deal is approved, the Richardson family would see its ownership of GMP Capital increase from about 24 per cent to about 40 per cent. Existing GMP Capital shareholders would hold 31.4 per cent of the restructured company, and the RGMP advisers would own 28.5 per cent.
Details of the offer were first announced in February, but after the economic impact of COVID-19, the value was adjusted downward to $420-million from $500-million as GMP Capital’s share price dropped. The new deal terms also called for a 15-cent-per-share special dividend to GMP Capital shareholders prior to the deal closing.
Anson argues GMP Capital has a significant amount of cash that its existing shareholders have a claim on, and the Richardson family is getting a control stake in the company for inadequate consideration compared with the non-family shareholders.
However, GMP Capital said in deal materials released Wednesday that paying the Richardson family in GMP Capital shares, rather than cash, preserves $43-million that the company can use to execute future growth.
A special committee of independent GMP directors recommended the deal. Both the Richardson family and financial advisers that oversee about 97 per cent of RGMP’s client assets have indicated they are in support of the transaction.
But the deal also requires the support of the majority of the GMP Capital shareholders unaffiliated with the Richardsons. Together, Mr. Sullivan and Anson Funds suggest they have about 14 per cent of the non-Richardson shares.
Mr. Wright said contrary to certain views, no party - including the Richardson family - has obtained an unfair advantage in the current transaction.
GMP Capital CEO Kish Kapoor told The Globe and Mail he fully expects the transaction to be approved on Oct 6. as shareholders have been waiting more than three years for this proposal.
If the RGMP transaction is not approved by shareholders next month, the agreement calls for the deal to be terminated, with no special dividend paid, and could prompt a large number of advisers to leave the firm.
With a file from Andrew Willis
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.
Clare O’Hara
David Milstead