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Streetwise Outgoing GMP CEO Harris Fricker to earn twice his salary and bonus as firm exits capital markets

Harris Fricker’s departure will trigger a payment of two times his annual salary and bonus, which the company estimated will total $7.7-million.

Fred Lum/The Globe and Mail

GMP Capital Inc.’s CEO Harris Fricker will receive a $1-million bonus – in addition to his multimillion-dollar severance – as he steps down next month, passing the reins over to Kishore Kapoor, a director at GMP.

Last month, GMP Capital Inc. announced plans to exit the capital markets business, selling its investment banking arm to U.S. brokerage house Stifel Financial Corp. for approximately $70-million.

Mr. Fricker’s compensation follows poor performance within GMP’s capital markets business where shares are down by 90 per cent from their peak in 2006 and about 75 per cent since Mr. Fricker was made chief executive in late 2010.

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Part of the capital-markets deal includes Stifel offering certain GMP employees retention and employment agreements – including a position for Mr. Fricker himself. While Mr. Fricker’s role with Stifel has yet to be announced, he intends to leave his position as president and CEO of GMP after a shareholders’ meeting on Aug. 6. Mr. Kapoor, who is also a director of Richardson Financial Group Limited, a major shareholder of Richardson GMP, will take over the executive role on an interim basis.

The appointment of Mr. Kapoor is in line with GMP’s commitment to “aggressively” expanding the wealth-management business for the long term, said a GMP spokesperson in an e-mail to The Globe.

Mr. Fricker’s departure will trigger a payment of two times his annual salary and bonus, which the company estimated will total $7.7-million. He’ll also receive an additional $1-million bonus if the deal closes.

In total, Mr. Fricker is pocketing more than 12 per cent of the value the independent brokerage is receiving for the sale of its key business unit.

The sale to Stifel came after months of speculation that something was brewing within the Toronto-based investment bank, which also owns a 33-per-cent stake in wealth manager Richardson GMP.

Once the Stifel transaction closes, GMP Capital plans to buy the remaining 67 per cent of Richardson GMP from its employees and Winnipeg’s Richardson family in a stock swap that will make the Richardson clan the company’s largest shareholder. GMP Capital will hold approximately $198-million in cash, and says it intends to make wealth management the centrepiece of its growth strategy going forward.

Turning to wealth management “offers the greatest potential for long-term value creation for shareholders” the company said in a proxy released on Wednesday. Over the past several years, GMP had considered certain strategic alternatives, including potential change of control transactions, divestitures, wind-downs and strategic acquisitions in the context of the company’s long-term business plan. The board of directors also considered the sale of the company as a whole.

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Last November, GMP appointed a special committee to help oversee its acquisition strategy. Discussions began with 14 interested parties, which then dropped to negotiations with three potential buyers – including Stifel. Among the three, none were interested in acquiring the company as a whole, according to the proxy.

In early January, it became apparent that the “most likely transaction” would involve the company’s capital markets business. Also at this time, the company began to discuss the potential for GMP Capital to acquire 100 per cent of Richardson GMP.

With a report from Niall McGee

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