The Industrial Alliance group agreed yesterday to buy Clarington Corp. for $273-million, a friendly deal that, according to spurned suitor CI Fund Management Inc., ignores the best interests of mutual fund unitholders.
Industrial Alliance Insurance and Financial Services Inc. of Quebec City will acquire the shares of Clarington for $14.25 apiece, trumping an offer of $13 a share from CI. The Industrial Alliance offer, which includes the assumption of debt, received the unanimous support of Clarington's board of directors and management. Toronto-based Clarington has about $4.1-billion in retail mutual funds assets under management.
The deal will transform Industrial Alliance into a $10-billion mutual fund company and is the fast-growing company's 11th acquisition since 2001. Clarington's distribution capabilities will enhance the Quebec firm's ability to market its insurance and wealth management products on a national scale, Yvon Charest, Industrial Alliance president and chief executive officer, said in an interview.
CI quickly withdrew its $254-million hostile takeover bid made on Oct. 31. It is the Toronto company's second failed hostile takeover bid in recent months. In August, CI abandoned plans to make an offer for Britain's Amvescap PLC, a fund manager best known in Canada for the AIM and Trimark brands.
In an interview, Bill Holland, CI's chief executive officer, said Clarington's board of directors is neglecting the best interests of the company's retail unitholders. The aborted CI offer included a commitment to cut Clarington's annual fund management fees by an average of 37 basis points. (A basis point is 1/100th of a percentage point.)
Clarington "gave up tens and tens of millions of dollars worth of costs reductions for the unitholders for a buck and a quarter for shareholders, for an extra $15-million," he said.
Sal Tino, Clarington's chief financial officer, agreed management fees "are important" but cannot be looked at in isolation. Industrial Alliance was willing to pay a "significant premium" above the CI bid, he said.
Clarington's fund management fees will remain competitive, Mr. Charest said, adding that some Industrial Alliance funds "could be a good alternative" to Clarington funds.
The Industrial Alliance offer was considered a positive development for Seamark Asset Management Ltd. Clarington funds account for about 30 per cent of the Halifax-based company's investment management business, a relationship put in doubt by the hostile CI offer.
"CI didn't want Clarington for distribution. They just wanted the assets," said John Aiken, an analyst at National Bank Financial Inc. "From Seamark's perspective, this is much better than CI. They have a chance of retaining some of the assets."
In trading on the Toronto Stock Exchange yesterday, Clarington shares rose $1.30 to $14.10, Industrial Alliance shares were up 14 cents to $28.71 and Seamark shares climbed 83 cents to $11.98. Shares of CI Fund Management fell 25 cents to $22.50.
© 2007 The Globe and Mail. All rights reserved.
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