Canaccord raises $60-million to build out wealth business

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Canaccord Genuity Group Inc. is raising $60-million in convertible debt as it attempts to give its Canadian wealth management business a shot of adrenalin.

The wealth management sector is generating some serious heat lately, with a number of smaller dealers getting gobbled up, and Richardson GMP Ltd. (RGMP), one of Canada's biggest independents, on the auction block.

Canaccord sold the debentures, which will pay out a 6.5-per-cent annual interest rate, through a private placement to an unnamed "large Canadian asset manager."

The cash infusion creates an opportunity "to recruit investment advisers, increase assets under management and improve the profitability" of the domestic wealth business, said Canaccord's chief executive officer Dan Daviau, in a statement released late Wednesday.

In the quarter that ended on June 30, Canaccord's Canadian wealth management unit made a pretax profit of $400,000, its first profit in nearly five years. Canaccord has $9.8-billion in assets under administration (AUA) in Canada, which makes it one of the biggest independent wealth managers in the country.

Among sizable independents, Canaccord competes with Raymond James Canada, which has $36-billion in AUA, and high-net-worth broker RGMP, which has roughly $27-billion.

Earlier this month, The Globe and Mail reported that RGMP is on the auction block, with TD Bank among the bidders. The company could sell for north of $500-million, according to Scotia Capital Inc. analyst Sumit Malhotra. Canaccord is not believed to a bidder for RGMP.

There have already been a number of takeover deals in the wealth management sector this year. In January, Echelon Wealth Partners Inc. bought Dundee Goodman Private Wealth, the retail brokerage arm of Dundee Corp. In May, Raymond James Canada acquired MacDougall MacDougall & MacTier Inc.

Canaccord, by contrast, has been clear it has no intention of unloading its wealth business, with Mr. Daviau recently telling The Globe and Mail there was "zero chance" of the unit being sold.