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Timing right for Mackenzie acquisition of Cundill

They've had a long, successful relationship, KEITH DAMSELL says, but both saw long-term benefits in a takeover of the well-regarded company

Peter Cundill is a victim of his own success.

Cundill Investment Research Ltd., the 29-year-old Vancouver firm founded by the value investment guru, was sold to Mackenzie Financial Corp. last week. IGM Financial Inc., the Winnipeg parent of Mackenzie, declined to disclose the price.

Cundill and Mackenzie have had a long and successful partnership. The Cundill-managed funds are arguably Mackenzie's leading brand at the moment, managing a stunning $12.5-billion in funds for the Toronto firm. The best-known fund of the group is the fast-growing Mackenzie Cundill Value Fund, a well-regarded $5.1-billion global equity vehicle.

IGM's motives behind the deal are transparent. First, it can take full control of Cundill's back-office functions, shave costs and, ultimately, crank up profits. Second, Cundill has about $3.3-billion in private client and institutional funds under management, including a growing presence in the U.S. market. It's a new and potentially lucrative business.

To its credit, Mackenzie and IGM have no plans to monkey around with Cundill's success. Mr. Cundill, a spry 67-year-old who continues to travel extensively, and his seven key investment specialists will remain based in Vancouver. All have signed long-term retention agreements.

And that's key to understanding why Mr. Cundill sold at this time in the firm's history. Managing more than $15.8-billion in money requires a lot of paperwork and is of no interest to a global stock picker. It's a continuing bureaucratic nuisance that sources say Mr. Cundill was quite happy to say goodbye to.

Seamark shuffles team

Stuart Raftus is shaking things up at Seamark Asset Management Ltd.

Mr. Raftus, a veteran investment executive appointed Seamark's president and chief executive officer in March, announced some major changes to the executive team last week.

Thomas MacLaren has been appointed chief investment officer, a step up from his most recent position as executive vice-president and member of the portfolio team. He replaces G. Peter Marshall, who will resume his previous role as Seamark's non-executive chairman. In addition, George Loughery, vice-president of equities, is leaving the Halifax-based firm.

The changes don't stop there. At least six new executives are joining Seamark to shore up marketing, client services and investment management. New hires include three senior staff from Rudderham Norwood Ellison Investment Counsel, a privately held money manager acquired by Seamark earlier this month.

Over the past four months, Seamark has trimmed its headcount through attrition and termination. Including new hires, the firm now employs 34 people, down from 42 at the beginning of the year.

In February, Clarington Corp. pulled about $2.9-billion in funds from accounts managed by Seamark, citing mediocre investment performance. Three months later, Seamark cut its regular quarterly dividend by more than half, to 7 cents from 20 cents. The company manages $5.3-billion, down from $10.3-billion last year.

Bay Street is less than enthusiastic about the company's prospects. Of the five equity analysts to issue updates last week, three have "underperform" ratings, one a "reduce" rating and the last a "hold."

Seamark "are still incurring redemptions across all their lines of business," said John Aiken of National Bank Financial Inc. "The problem is that their value [investment] style, especially in the U.S., in the near term has really cost them."

On the Toronto Stock Exchange Friday, Seamark shares closed up 43 cents to $6.95, near a recent 52-week low of $6.35. In September last year, the shares reached a 52-week high of $18.50.

Retrocom investors stung

Retrocom Growth Fund Inc. plans to file for bankruptcy protection.

The insolvent labour-sponsored fund filed a notice of intention last week to make a proposal under the Bankruptcy and Insolvency Act. Financial adviser RSM Richter Inc. has been named trustee.

In December, Retrocom took the drastic step of suspending redemptions in the $48.9-million fund, attributing the freeze to a flood of investors wishing to exit. The real estate development fund has warned its estimated 21,000 investors that "a significant reduction" in the value of the fund will be required.

The sad news is that the fund's 21,000 investors -- including a number of construction trade unions -- may be left with nothing. To date, Richter has cut deals to sell the fund's interests in eight properties for about $16.5-million. The cash will be used to cover Retrocom's debts.

The fund continues to hold about 15 different investments but sources indicate they have little or no value. Over the next two months, Richter will attempt to find a buyer that may want to snap up Retrocom for its tax losses. If a deal proceeds, Retrocom unitholders may receive a token sum. Six years ago, its units traded in the $11 range.

Keith Damsell is editor of GlobeinvestorGOLD

kdamsell@globeandmail.com

© 2007 The Globe and Mail. All rights reserved.

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