CI Financial has announced that it will make an offer for all of the issued shares of fund manufacturer Clarington. The $13 per share offer represents a significant 62.5% premium over Friday’s close of $8.
The formal offer will be mailed to Clarington shareholders within the next two weeks, giving shareholders the choice of all-cash and stock – in the form of CI common stock – or a mix of both. At a price of $13 per share, the deal will be worth approximately $254 million.
CI says it plans to reduce Clarington’s fund management fees within 12 months of closing the deal by bringing the funds’ cost structure in line with its own products. CI currently manages approximately $53 billion in assets, spanning mutual funds, segregated funds and closed-end products.
“Clarington made no sense as a standalone company,” said Stephen MacPhail, president and chief operating officer of CI Financial. “There are either large companies or niche players, but beyond that there is not much space. It’s hard to be a three or four billion dollar investment fund and make money – it’s impossible.
He said the high premium may seem like a high price, but given CI’s economies of scale, the deal would still be beneficial.
“Investors in Clarington funds paid extremely high fees compared to other products,” MacPhail said. “We believe that by moving their cost structure to ours, we will make these products much better and help improve our brand with their ingredients.”
According to IFIC’s September statistics, CI manages $49.7 billion in mutual fund assets, while Clarington manages about $4.25 billion. The combination of the two would total $54 billion, less than RBC Asset Management’s by just under $2 billion, but MacPhail points out that CI already has more long-term assets.
Clarington only went public in March of this year, with an IPO price of $10.50, reaching an all-time high of $12.90.
Submitted by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com
(31/10/05)
