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Investment dealer GMP Capital Inc. has reworked its proposed $420-million takeover of a wealth management subsidiary to reflect the realities of a postpandemic market.

Back in February, Toronto-based GMP Capital unveiled plans to swap its publicly traded stock for shares in partly owned subsidiary Richardson GMP. Winnipeg’s Richardson family is a significant shareholder of both companies, and the restructuring has been playing out over the past two years.

On Thursday, GMP Capital announced that, as part of the transaction, its shareholders will receive an additional 15 cents a share, or a total of $11.3-million, in a special dividend. It also said the Richardson clan will leave additional capital in the company to fund expansion by keeping $32.1-million invested in preferred shares, a holding the family was required to redeem.

In addition, GMP Capital changed the terms of the share swap with Richardson GMP’s owners, who include the firm’s 165 financial adviser teams. The company was planning to trade one GMP Capital share for every two shares of privately held Richardson GMP; now the ratio is one share for every 1.875 shares.

GMP Capital executives said the changes reflect a decline in Richardson GMP’s value after the sharp drop in interest rates in March, which cut into the profits it earns on its clients’ cash balances. In February, the transaction valued the entire franchise at $500-million; now the figure is $420-million.

“The revised terms to the previously announced transaction in February, 2020, strike what, we believe, is an appropriate balance taking into account the effects of the global pandemic, feedback raised by various stakeholders and retaining the appropriate level of capital to execute our long-term value creation strategy,” said Donald Wright, chair of the board at GMP Capital, in a news release.

Shareholders are scheduled to vote on the transaction on Oct. 6. If the deal is approved, the Richardson family will own approximately 40 per cent of Richardson GMP, the company’s financial advisers will have a 28.5-per-cent stake and existing GMP Capital shareholders will hold 31.4 per cent.

Last year, GMP Capital sold its capital markets business to St. Louis-based investment dealer Stifel Financial Corp., raising $42.2-million, in order to focus on managing money for high net worth individuals. Richardson GMP advisers currently oversee $29-billion of client assets, up from $23.5-billion when the stock market slumped in March.

“After a multiyear process to transform GMP, we can begin to capitalize on the considerable opportunities in the multitrillion-dollar wealth management industry in Canada,” said Kish Kapoor, interim president and chief executive of GMP Capital. He said that once the deal is completed, the company plans to recruit financial advisers from rival dealers, including the bank-owned firms, and will attempt to acquire small wealth management platforms.

“We believe, and the Richardson family believes, that the financial services ecosystem needs strong, high-quality independent firms,” Mr. Kapoor said. “Amongst many things, the health crisis has reminded us about the importance and demand for high-quality, face-to-face advice, especially during a period of volatile and uncertain markets.”

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