National Bank of Canada put months of rumour to rest Tuesday and announced it will acquire mutual fund manager Altamira Investment Services Inc. in a bid to enhance its wealth management arm and expand outside of Quebec.
Montreal-based National Bank, Canada's sixth-largest, said it will pay up to $314-million, partially in common stock, and assume $195.9-million of Toronto-based Altamira's debt.
Along with the debt, the deal could be worth as much as $510-million. National Bank said the final price will be based on assets at closing and that it will issue no more than three million shares.
Speculation about the deal emerged in April, when the Globe and Mail reported that privately owned Altamira was looking for a buyer. Sources said National Bank was negotiating to purchase a small U.S. investment bank but also keeping an eye on Altamira.
Altamira has been struggling with net redemptions because of poor fund performance.
Access to Ontario market The purchase will provide National Bank, currently a leader in wealth management in Quebec, with access to a larger Canadian market. More than half of Altamira's mutual funds assets are from Ontario residents.
Irwin Michael, a portfolio manager at ABC Funds in Toronto, told globeandmail.com that in the long run, the deal will work out well. "It is not a seamless acquisition. But there will be ways to reduce duplication."
In a Tuesday statement, National Bank said the acquisition of Altamira will double its mutual funds under management to $10.4-billion. Altamira manages $6-billion in assets, including $5-billion in mutual funds for individuals.
"Our strategy is to increase our share of the wealth management market outside Quebec over the next three years. The Altamira acquisition represents a major step in that direction," National's president and chief executive officer Real Raymond said in a release.
"In addition, this transaction represents an excellent opportunity to participate in industry consolidation, where fewer and fewer opportunities of this size exist, and to achieve the necessary critical mass for further expansion."
The purchase is National Bank's second outside commercial banking since Mr. Raymond took over as chief executive in March.
The value of the transaction, which is expected to close Aug. 12, represents about 9.5 per cent of Altamira's risk-weighted assets under management, the companies said.
The acquisition will not affect National Bank's earnings in 2002, it said, and should add 4 cents to earnings a share in 2003 and 10 cents in 2004.
Michel Tremblay, a senior vice-president at National Bank, will become chairman of the board of Altamira. He pointed out that "Altamira is one of the great names in wealth management," something National has said it is searching for in an acquisition.
Privately owned Altamira is 39 per cent owned by Boston-based venture capital firm TA Associates Inc., 28 per cent by institutional investors and 33 per cent by Altamira managers and employees. They own common and preferred shares.
Sources have told the Globe and Mail TA Associates, which acquired its stake in 1997 and generally doesn't hold on to its investments for a long time, wants out of Altamira. The fund company's assets have declined by more than $2-billion since it filed a prospectus for an initial public offering in November, 2000. Altamira shelved its IPO because of poor market conditions. Altamira also has a $70-million principal loan repayment coming due in September.
Shares of National Bank, listed on the Toronto Stock Exchange, slipped 3 per cent or $1 to $31.90 on the Toronto Stock Exchange Tuesday.