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GMP faces ‘good dilemmas’ as it weighs possible sale of RGMP Add to ...

GMP Capital Inc.’s chief executive officer says the company is facing “good dilemmas” as it weighs its options about the future of its roughly 30-per-cent stake in high-net-worth asset manager Richardson GMP Ltd. (RGMP).

As The Globe and Mail has reported, RGMP is currently in play with Toronto-Dominion Bank, recently making a $600-million preliminary offer to buy the firm, according to people familiar with the sale process. TD recently sought an extension on its exclusivity to perform due diligence until Nov. 22, but it remains unclear whether that process will result in the bank making a final, binding bid.

“Are there players who are interested in acquiring [RGMP]? Yes,” said GMP’s CEO Harris Fricker during a conference call with analysts on Wednesday, following the release of the company’s third-quarter results.

“We consider everything and are constantly assessing what we think is the best outcome for shareholders and employees. We have a host of options luckily that are all pretty darn attractive.”

In mid-November, any of RGMP’s three major shareholders can trigger a so-called “liquidity mechanism,” which would allow any of the parties to buy out the others. Apart from GMP, the other shareholders are Richardson Partners Financial and the RGMP adviser network, which own 30 and 40 per cent of the equity, respectively.

GMP reported a $10.6-million loss in the quarter that ended on Sept. 30. Canada’s second-largest independent investment bank also took a $15-million restructuring charge on both its recent acquisition of Calgary energy boutique FirstEnergy Capital Corp. and the shuttering of its Houston energy banking operation.

Rival investment bank Canaccord Genuity Group Inc. unveiled its fiscal second-quarter results late Tuesday, with the Vancouver-based firm reporting a loss of 5 cents a share.

Canaccord’s U.K. wealth management unit was the strongest part of its business, generating $7.2-million in profit, up 68 per cent year over year.

“The U.K. wealth operations of Canaccord continue to perform very well, as both assets under management and revenue reached record levels,” Scotia Capital Inc. analyst Sumit Malhotra wrote in a note early Wednesday.

The weak spot for Canaccord was its core capital markets business. Advisory fees fell to their lowest level in six years. “We need to perform better in our capital markets business,” chief executive officer Daniel Daviau said during a conference call with analysts on Wednesday.

Separately, the company announced that chief financial officer Brad Kotush, who had been with the firm for the past 18 years, will step down in February of next year. Don MacFayden, a senior vice-president with Canaccord, will assume the CFO spot upon Mr. Kotush’s exit.

Shares in Canaccord fell 6.5 per cent Wednesday.

Unlike GMP, which may end up unloading its wealth business, Canaccord has made it clear it has no intention of selling its wealth franchise. On Wednesday, Mr. Daviau talked up the value of its U.K. wealth business during the conference call and even took a swipe at rival GMP in the process.

“[Canaccord’s U.K. wealth assets] are comparable to what Richardson GMP’s assets are,” Mr. Daviau said. “The only difference is this business actually makes money.”

Over the long term, GMP has struggled to consistently make money from its share in RGMP since acquiring its stake in 2009. Lately though, the wealth manager has skated back into the black.

RGMP made a profit of $4.9-million in the quarter that ended on Sept. 30, compared with a loss of $160,000 a year earlier.

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