National Bank of Canada, which has made four asset purchase deals and an announcement to acquire a minority stake in a Canadian brokerage firm in 2008, reportedly plans to expand its presence in the wealth management market though acquisitions, new product and service offerings.
Earlier, the bank said that National Bank Financial Group has agreed to acquire a 12.5% fully diluted equity interest in Wellington West for C$35.8 million or C$54.40 per share. This price is the same as Wellington West’s recently completed C$12.5 million share rights offering with its shareholders. In addition, Wellington West will be entitled to receive a capital contribution from National Bank Financial Group up to an additional C$35 million, or the equivalent of C$53.10 per share, if it achieves certain earnings targets over the next three years.
As part of the overall transaction, National Bank Financial Group has a right to acquire up to an additional 5% of Wellington West’s equity in the event that existing shareholders wish to sell their shares from time to time. Purchases of the additional 5% will be done at pricing which is based upon Wellington West’s future share issuance transactions.
Completion of the transaction is subject to a number of conditions, including certain regulatory approvals and the adoption of a new shareholders agreement by holders of at least two-third of Wellington West’s shares. Closing of the transaction is expected in mid-October 2008. Wellington West will continue to operate independently under the leadership of its senior management team led by Charlie Spiring and Kish Kapoor.
The investment provides National Bank Financial Group with certain rights, including the right to prevent dilution through the purchase of additional shares in the future. Wellington West has also granted National Bank Financial Group a right of first refusal in the event that Wellington West decides to pursue certain transactions, such as a sale of its business or a sale of a substantial block of its shares.
National Bank Financial Group will also have a representative on the Wellington West board of directors. National Bank Financial Group must maintain certain minimum ownership levels in Wellington West in order to preserve its rights.
Luc Paiement, executive vice president of wealth management at National Bank Financial Group and co-president and co-CEO of National Bank Financial, said: Our investment reflects National Bank Financial Group’s commitment to invest in wealth management businesses across the country and expand our distribution alternatives, even in the current challenging market environment.