The fight for control of Clarington is heating up, with the president and CEO of CI Financial calling his company’s rejection of the offer “ludicrous.”
“It wasn’t until Wednesday that we received a copy of the support agreement between Clarington and Industrial Alliance that we learned the terms under which they would consider another offer as viable,” said Stephen A. MacPhail, president and chief operating officer of CI.
The takeover battle began on Oct. 31, when CI offered Clarington $13 a share, or $254 million in cash and stock. On November 7, Industrial Alliance submitted a competitive offer of $14.25 per share, or $273 million. Clarington’s board accepted IA’s offer, and CI immediately withdrew its original offer.
On November 14, CI returned with a new offer of $14.75 per share, or $285 million. Both the CI offer and the Industrial Alliance offer include cash and/or stock.
Industrial Alliance announced today that it plans to mail a takeover offer circular to Clarington shareholders no later than November 21, 2005.
CI has also repeatedly said that it plans to reduce the MERs of several Clarington funds, bringing them in line with the offerings of the Clarington funds, making their offering more attractive to Clarington shareholders.
Industrial Alliance said it also plans to make reductions in the cost structure of the Clarington funds.
“IA strives to provide products at competitive prices,” said Normand Pépin, executive vice president of Industrial Alliance. “In fact, our expense ratios across our segregated funds are on average 40-50 basis points lower than comparable segregated funds offered by CI and its affiliates.”
While CI has announced that it will combine many of Clarington’s funds into its own products with similar investment strategies, Industrial Alliance says it plans to keep the newly acquired funds as separate products.
“Investors chose Clarington Funds for a reason,” said David Scandiffio, president of Industrial Alliance Fund Management. “By combining the Clarington Funds into larger, less flexible funds from a larger complex, CI will fundamentally change the nature of the offering, including distribution features, tax efficiency and performance potential.”
The current agreement between Clarington and Industrial Alliance includes a $7 million break clause, which MacPhail said represents a shareholder gift to the buyer of 50 cents per share.
“We are seeing a direct transfer of wealth from Clarington shareholders to Industrial Alliance of almost $0.50 per share that would otherwise have been included in a competitive offer,” MacPhail said. “If I were an investor who had purchased Clarington shares since CI announced the offer, I would be shocked to hear that Clarington and Industrial Alliance have acted as if the CI offer did not exist.”
Another potential twist in this story came late Friday afternoon when Industrial Alliance announced it was taking an additional $65 million reserve to cover losses related to its investment in Norshield (see The recipient of Norshield finds little money), bringing the total benefit amount to $78 million. However, the company said this provision “does not in any way alter” IA’s financial stability.
Submitted by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com
(18/11/05)
