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Gluskin, Sheff near exit amid Bay St. transformation

Thursday, September 26, 2013

JACQUELINE NELSON

Two of Bay Street's best-known money managers have nearly sold out of the firm they established, another step in the transformation of Canada's wealth management industry.

Ira Gluskin and Gerald Sheff are selling a large portion of Gluskin Sheff + Associates Inc., which the two founded in 1984, in a bought deal worth $122-million.

Meanwhile, independent asset manager CI Financial Corp. is buying out a struggling rival.

The changes come as banks and insurers are competing aggressively for investor dollars by acquiring smaller players and building out distribution channels.

Gluskin Sheff's sale significantly reduces the two founders' control over the firm.

Less than a year ago, they controlled 55 per cent of the company's multiple voting shares, according to company filings.

After the new deal, the dual share classes will be collapsed, leaving Mr. Gluskin and Mr. Sheff each with only 2 per cent of the company.

Investment banks RBC Dominion Securities and TD Securities Inc. are lead underwriters on the deal, announced on Wednesday.

This monetization should be a positive development for shareholders because it improves the firm's liquidity, reduces the likelihood the firm will get bought out and could attract institutional shareholders, said Scott Chan, analyst at Canaccord Genuity.

There was already some pressure on Mr. Gluskin and Mr. Sheff to act. Their superior voting shares had an expiration date in mid-2016, according to regulatory filings.

Gluskin Sheff said earlier this year that it had entertained the possibility of a sale at the request of the co-founders. The firm hired investment bankers to take bids and received submissions, but the firm later said it would hold off on a sale.

Along with the sale of the founders' shares, Gluskin Sheff also said it would eliminate its dual share structure, converting outstanding multiple voting shares to subordinate voting shares.

After the conversion there will be about 29.5 million outstanding subordinate voting shares, of which management and employees own 23 per cent.

Mr. Gluskin and Mr. Sheff told the company that this sale was "the next logical step" in their transition, according to the company's release.

Also Wednesday, growing asset manager CI Financial Corp. announced it is buying a 65-per-cent stake in corporate debt-focused Marret Asset Management Inc.

Marret is run by bond specialist Barry Allan, who founded the firm in 2001 and will remain with the company.

CI Financial has previously said that it would like to build out its alternative investment product, Mr. Chan said, and it has a stronger distribution channel through which to sell them.

"They've always wanted to add two or three more teams if they felt that they could get the right deal," he said.

Marret's assets under management have declined in the past few years, and it has not been immune competitor pressure.

Dynamic Funds, which is owned by the Bank of Nova Scotia through a subsidiary, ended its subadvisory relationship with Marret in May this year, bringing more money management in house.

Scotiabank bought a 38-percent stake in CI Financial in 2008

Gluskin Sheff (GS)

Close: $20.11, up 31¢

CI Financial (CIX)

Close: $32.54, down 4¢