GMP Capital Inc. faces a shareholder revolt over plans to restructure the company and give Winnipeg’s Richardson family a larger stake, with the wealth manager’s former chief executive officer and a hedge fund attempting to block the deal ahead of a vote next month.
Kevin Sullivan, co-founder and former CEO of Toronto-based GMP Capital, announced on Friday that he will nominate a new board of directors for the company. The move is part of a campaign to rework the terms of a proposed transaction that would let family-owned Richardson Financial Group Ltd. increase its stake in GMP Capital to 40 per cent from 24 per cent. Mr. Sullivan holds a 4-per-cent stake in GMP.
Late Thursday, investment manager Anson Funds said it owns 6.5-per-cent of GMP Capital and will vote against the proposed restructuring at a shareholder meeting on Oct. 6. Anson said it opposes the long-planned transaction, which is supported by GMP Capital’s independent directors, because it “results in de facto control of GMP being transferred to the Richardson family, a related party, at significantly less than fair value and without paying a control premium.”
In the transaction that triggered this fight, Toronto Stock Exchange-listed GMP Capital would acquire 100 per cent of its privately held wealth management division, Richardson GMP Ltd, which is jointly owned by GMP Capital, the Richardson family’s company and its investment adviser employees. The share swap was announced in February and the value was adjusted downward in August to $420-million from $500-million to reflect the economic impact of the COVID-19 pandemic.
In statements on Thursday and Friday, GMP Capital said it believes the deal offers the greatest potential for long-term value-creation for its shareholders. It noted a special committee of independent directors recommended the deal, and RBC Capital Markets provided a favourable opinion. And it urged shareholders to read more details in a circular to be filed next week before taking any action.
The deal requires the support of the majority of the GMP Capital shareholders unaffiliated with the Richardsons. Mr. Sullivan and Anson suggest they have about eight million shares between them, or about 14 per cent of the non-Richardson shares.
As part of the transaction, GMP Capital would issue about 107 million shares, worth about $188-million at Friday’s closing price of $1.76, for the portion of the company it doesn’t already own.
About half of the new shares would go to the Richardsons. If the current proposal is approved, existing GMP Capital shareholders would hold 31.4 per cent of the company and advisers would own 28.5 per cent, while the Richardson family would be the largest shareholder, with 40 per cent.
Mr. Sullivan said in a press release that he presented a revised transaction last week to the GMP Capital board, one that he said would benefit the company’s financial advisers and be supported by public shareholders other than the Richardson family. Mr. Sullivan, former chairman of Richardson GMP, said he was told this week that the Richardson clan “was unwilling to discuss or negotiate revised terms.” The former CEO said he would release details of his proposal and a slate of directors to replace the board at GMP Capital in a regulatory filing “in due course.”
GMP Capital has about $123-million of cash, part of which came from the sale of the company’s capital markets division last year to St. Louis-based investment dealer Stifel Financial Corp. The sale was part of GMP Capital’s two-year-old strategy to focus on managing money for individuals with high net worth.
Toronto-based Anson, which manages $1-billion on behalf of its clients, said in a press release that the proposed restructuring “strips GMP of its cash resources to the detriment of minority shareholders.” Anson said the “only viable way” to win support from minority shareholders “is to distribute a significant amount of the company’s working capital to those with a rightful interest, GMP Capital common shareholders.”
Richardson GMP is one of Canada’s largest independent wealth managers, with 165 adviser teams that oversee $29-billion of client capital. The Richardsons have roots in grain trading that date back to 1857, and in recent years, the family has successfully invested in energy and financial services. They built investment bank Richardson Greenshields over several decades, then sold it to Royal Bank of Canada in 1996 for $480-million. The family re-entered wealth management by starting what’s now Richardson GMP in 2003.
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Andrew Willis
David Milstead