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CI unlikely to sweeten Clarington bid

'Fifty cents from here, we will probably be gone,' Holland warns


TORONTO -- CI Financial Inc. is unlikely to sweeten its offer for Clarington Corp., indicating the fight for the Toronto fund company may be coming to a close.

"We are not going to fight this thing forever. Fifty cents from here, we will probably be gone," Bill Holland, CI's chief executive officer, told shareholders at the Toronto company's annual meeting yesterday.

On Nov. 14, CI made a hostile offer of $14.75 a share or $218.3-million for Clarington, a Toronto fund manager with about $4.2-billion in retail assets under management. Terms include substantial cuts in the fees paid by the fund company's unitholders.

The cash bid trumps a Nov. 7 offer of $14.25 a Clarington share from Industrial Alliance Insurance and Financial Services Inc. But the Quebec City company's $210.9-million offer has received the unanimous support of Clarington's board and management, owners of about 25 per cent of the company's shares.

The competing offers do not include the assumption of about $59-million in Clarington debt.

For the first time yesterday, the Clarington board acknowledged that CI's hostile offer constitutes a "competing transaction."

Last week, the Clarington board described the CI offer as a "non-binding, highly conditional proposal" that would not be considered a competing transaction under the terms of the company's support agreement with Industrial Alliance.

Under the terms of that agreement, Industrial Alliance has five business days to amend its offer and match the CI bid.

"We are reviewing our options," Industrial Alliance spokesman Jacques Carrière said yesterday.

Late yesterday, Industrial Alliance disclosed it bought 43,900 Clarington shares on the open market at prices ranging from $14.88 to $15.

The company owns a total of 635,100 shares, representing about 4 per cent of Clarington's 14.8 million outstanding shares, fully diluted.

"We do believe that it is likely that Industrial Alliance will match CI's current bid," John Aiken of National Bank Financial Inc. said in a report yesterday.

Clarington's sales and distribution platform in English Canada represents "greater strategic value" for Industrial Alliance than for CI, the analyst said.

CI management has been frustrated by Clarington's attempts to thwart a "clearly superior bid" for both shareholders and unitholders, Mr. Holland said in an interview.

"We are not going to continue to bid into this. We are closing in on what this thing is worth to us," Mr. Holland said.

"We have to look at the risk of the deal and we need enough accretion to justify the risk we are taking," adding the company is not prepared to go as high as $15.25.

In his remarks to investors, Mr. Holland joked that CI was "zero for three" this year.

In addition to the troubled fight for Clarington, CI in August abandoned plans to make an offer for British fund giant Amvescap PLC. One month later, CI shelved plans to convert to an income trust, citing the federal government's consultation process on the asset class.

In other developments, CI shareholders voted yesterday in favour of changing the company's name from CI Fund Management Inc. to CI Financial Inc.

In trading on the Toronto Stock Exchange yesterday, Clarington shares rose 19 cents to $15.

CI's slipped 25 cents to $24.10 and Industrial Alliance shares were off 53 cents at $27.75.

© 2007 The Globe and Mail. All rights reserved.

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