Toronto-Dominion Bank has made a preliminary offer of about $600-million to buy wealth management firm Richardson GMP Ltd., according to people familiar with the sale process.
TD, Canada's second-largest bank by assets, recently sought an extension on its exclusivity to perform due diligence on the asset before making a binding bid. The bank's due diligence period with Richardson GMP runs until Nov. 22, one of those people said.
A sale of Richardson GMP, one of Canada's last sizable independent wealth-management companies, with more than $27-billion in assets under administration (AUA), would continue a wave of consolidation in the sector. It is unclear, however, whether TD's due-diligence process will result in a definitive deal.
"As is our normal practice, we will decline to comment on rumour or speculation," wrote TD spokeswoman Alicia Johnston in an e-mailed statement on Sunday.
A representative for GMP Capital Inc., which holds a minority stake in Richardson GMP, also declined comment. Other officials for Richardson GMP, meanwhile, did not immediately respond to requests for comment.
TD's preliminary bid of roughly $600-million is higher than what some observers have predicted the asset would fetch. Sumit Malhotra, an analyst with Scotia Capital Inc., recently estimated Richardson GMP could be sold for about $550-million.
Richardson GMP is focused on high-net-worth clients that generate lucrative fees, making it an attractive asset. TD is the only big Canadian bank that has not made a sizable acquisition in the full-service retail brokerage sector.
TD has instead focused on building its discount-brokerage business. In the U.S., the bank has a strong footprint with a 42-per-cent stake in TD Ameritrade Holding Corp. Last week, TD Ameritrade and TD Bank made a joint bid to acquire Scottrade Financial Services Inc. in a $4-billion (U.S.) deal.
Richardson GMP was created in 2009, when GMP Capital merged its wealth-management arm with Winnipeg-based Richardson Partners Financial. GMP and Richardson Partners each own about 30 per cent, with the firm's retail advisers owning the remaining 40 per cent.
This November, a so-called "liquidity mechanism" kicks in that allows any of the three major shareholder groups to officially put Richardson GMP in play.
A sale of Richardson GMP would be the biggest M&A deal in the Canadian wealth-management sector in many years.
In 2010, Bank of Nova Scotia announced a $2.3-billion (Canadian) deal to buy out the remainder of DundeeWealth Inc., completing the transaction the following year. In 2011, National Bank of Canada bought Wellington West Holdings Inc. in a deal that valued the firm at $330-million.
In September, The Globe and Mail reported the auction process for Richardson GMP had attracted other interested parties including Raymond James Financial Inc.
A representative for Raymond James did not immediately respond to a message seeking comment about whether the company remains interested in the asset.
Raymond James Ltd., the Canadian arm of U.S.-based Raymond James Financial Inc., has $36-billion in AUA. In May, Raymond James bought Quebec-based asset manager MacDougall MacDougall & MacTier Inc., which added $6-billion to its AUA.
A sale of Richardson GMP could potentially leave Canaccord Genuity Group Inc. and Raymond James Ltd. as the only non-Canadian-bank-owned wealth managers with considerable scale.
Canaccord, which has roughly $9.8-billion in AUA, is currently making a push in wealth management. In September, the company raised $60-million to help recruit new retail advisers to its platform.
A major concern for any potential acquirer would be retaining Richardson GMP's high-net-worth adviser network. Advisers who move from the entrepreneurial culture of an independent often struggle to adapt to the more rigid confines of a bank-owned dealer.
The advisers own approximately 40 per cent of the equity in Richardson GMP. One possibility is that TD could elect to pay for part of the deal in stock that would vest over a number of years, said one source. Such a structure could act as an incentive for advisers to stay over the long-term.
With a report from Andrew Willis