Fifteen months after Power Corp. of Canada consolidated its ownership structure, the investment powerhouse’s share price has hit a 13-year high as CEO Jeffrey Orr sharpens his focus on the company’s core financial services.
Power, which includes three publicly traded companies, underwent a major reorganization in early 2020 to create a single holding company by removing Power Financial from the Toronto Stock Exchange.
Since the restructuring, Mr. Orr, who was appointed Power Corp.’s president and chief executive officer when Paul Desmarais Jr. and André Desmarais retired last year, has been focused on a strategy that aims to divest all non-financial services businesses over the next two to three years. These include electric-vehicle maker Lion Electric Co. , LED lighting company Lumenpulse Inc., Peak Achievement Athletics Inc., the maker of Bauer and Easton sporting goods, and GP Strategies Corp. , a workplace technical training company.
“We had all these different investments – all these companies that no one really understood – and they couldn’t value or know what they were about,” Mr. Orr said in an interview with The Globe and Mail. “So we’ve said very clearly, we are going to turn into a financial services business.”
As a result, Power Corp. shares are trading at $37.52 – up almost 30 per cent year to date and the highest since the global financial crisis in 2008.
“I think the market is starting to believe that we are in fact executing what we said we were going to do, and that’s resulting in confidence” from shareholders, Mr. Orr said.
That includes selling Quebec-based Lion Electric, a manufacturer of zero-emission vehicles that Power invested $53-million in over the past several years. Last week, Lion began trading on the New York Stock Exchange, boosting Power’s stake in the company to $1.2-billion.
“It is an amazing company. ... Electric vehicles are the future, but it is not on strategy for Power Corp.,” Mr. Orr said.
Power owns a 66.8-per-cent stake in Canadian insurer Great-West Lifeco Inc. , a 62.1-per-cent share of wealth management firm IGM Financial Inc. , and 14.1 per cent of Groupe Bruxelle Lambert, a European investment company. It also holds, through a variety of its entities, a 43-per-cent stake in online investment firm Wealthsimple Technologies Inc., and alternative investment platforms such as Sagard Holdings and Power Sustainable Capital Inc.
Mr. Orr said the growth of the investments platforms, which include many of the company’s bets on financial technology, are going to be funded by third-party capital, not by Power.
“We are moving to a much more capital light business, and all the excess capital that we take from either selling a stand-alone business that is no longer on strategy – or that we get out of lightening our capital commitment to our investment strategies – will be either returned to shareholders in buyback or to support [our other financial companies] in their growth,” Mr. Orr said.
Sagard Holdings, run by Paul Desmarais III, houses most of Power Corp.’s fintech investments, as well as private-equity, private-credit and health care royalties, while Power Sustainable runs funds in infrastructure and renewable energy, as well as investments in China.
Power Corp.’s embrace of disruptive financial technology startups has helped deliver meaningful returns to long-disgruntled shareholders. Earlier this month, one of Power’s largest fintech bets paid off when Wealthsimple announced a $750-million deal with some of Silicon Valley’s largest investors.
Power’s $315-million investment in Wealthsimple has been lucrative – the value of those investments was $934-million at the end of 2020, or close to three times the amount invested. But Mr. Orr said investing hundreds of millions into a single company is not the “typical strategy.”
Through its venture capital company Portag3 Ventures, Power has made smaller investments in more than 50 fintech companies – some of which are already being integrated with several of Power’s larger core wealth management and insurance companies.
In addition to fintech, Mr. Orr is also keeping a close eye on acquisitions. Last summer, the company completed four deals – spending a total of $6-billion in acquisitions in both Canada and the United States.
In the U.S retirement savings business, an area of focus for Mr. Orr., Great-West Life’s subsidiary Empower purchased the retirement business of Massachusetts’s Mutual Life Insurance Co. and digital wealth manager Personal Capital for US$3.35-billion. The deal bolstered Power’s plans to further participate in the country’s consolidation of the defined-contribution record-keeping space.
“We expect more businesses will come to market because they can’t compete and we will continue to consolidate and be very active on the M&A front in that area,” Mr. Orr said.
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