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Industrial secures virtual lock on Clarington as CI bows out


Industrial Alliance group is poised to expand its reach into English Canada by acquiring Clarington Corp. after CI Financial Inc. bowed out of the bidding war yesterday for the Toronto mutual fund company.

"We're not celebrating. We're just happy to see these developments," said Jacques Carrière, spokesman of Industrial Alliance Insurance and Financial Services Inc.

In a brief statement yesterday, CI of Toronto said "it no longer intends" to make an offer for Clarington, manager of about $4.2-billion in mutual funds. Senior management of Canada's third-largest fund company signalled last month that it was unlikely to continue the bidding war for Clarington.

CI's exit gives the Industrial Alliance offer a virtual lock on Clarington. On Dec. 2, the Quebec City-based company offered $15 per Clarington share, a deal that values Clarington at about $222-million. The offer, due to expire Dec. 28, has the backing of Clarington's board and management, owners of about 25 per cent of the company's shares. In addition, Industrial Alliance owns about 6 per cent of Clarington's 14.8 million outstanding shares, fully diluted.

Industrial Alliance's friendly offer trumped a Nov. 14 hostile offer from CI that valued Clarington at $14.75 per share, about $218.3-million. The two cash offers do not include the assumption of about $59-million in Clarington debt.

Clarington provides "greater scale and additional geographic diversification" and potential new sales channels for Industrial Alliance, said Michael Goldberg an analyst at Desjardins Securities Inc.

The takeover battle's big winners, however, are Clarington's executive team. On Oct. 6, three senior managers -- chairman Terence Stone, president and CEO Adrian Brouwers and chief financial officer Sal Tino -- met with Industrial Alliance's representatives for the first time. Talks led to plans to sell the company to Industrial Alliance for $13 a share. The preliminary deal valued their collective stake of close to three million shares and options at about $38.7-million.

But the emergence of CI's hostile drove the value of the company higher. Industrial Alliance's $15 offer has boosted the value of their combined interest to about $44.7-million.

© 2007 The Globe and Mail. All rights reserved.

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