Canadian-based Canaccord Genuity Group Inc will acquire Australian second-tier stockbroker Patersons Securities Ltd in a A$25 million deal to create a “financial powerhouse” specialising in capital markets, broking and wealth management.
Canaccord announced the much-speculated transaction this morning, confirming it would purchase the Melbourne-based securities business in a cash settlement through its local office Canaccord Genuity Australia.
The acquisition is in a bid to “substantially increase” the scale of Canaccord’s wealth management operations and improve its business mix to deliver greater stability and long-term value for clients and shareholders.
Canaccord Genuity Australia chief executive officer Marcus Freeman believes the synergies between the two companies will create a strong financial services offering for the new combined client base.
“The cultural alignment between the two teams has been clear from our first interaction and has been the foundation for all discussions,” he said.
“The combined business will create a leading Australian capital markets, stockbroking and wealth management business with a powerful offering for our respective corporate, institutional and private clients.”
The Patersons transaction will be implemented via a scheme of arrangement, under which Canaccord will make a cash consideration of A$25 million or $0.2355 cents per share (amounting to approximately C$23.3 million).
The deal is subject to various conditions including shareholder and court approval and is expected to be completed during the December 2019 quarter.
Upon closure, Canaccord said it would implement an equity incentive program for key Patersons employees with a view to increasing employee stock exposure and retention.
Patersons directors and senior management – who represent 60% of the company’s shareholder base – have confirmed they will be voting in favour of the scheme.
They will continue to have significant involvement and influence in driving the growth and development of the combined business.
Canaccord Genuity Australia’s wealth management business will become known as CG Patersons, and will be led by Patersons current executive chairman Michael Manford.
Founded in 1903, Patersons has become one of Australia’s premier financial services firms, offering investment management, financial planning, stockbroking advice and execution services for mass-affluent investors.
The company also engages in corporate finance activities, providing debt and equity solutions for emerging small and mid-cap companies and institutional capabilities for domestic, Asian and international clients investing in Australia.
In the 2018 financial year, Patersons earned a net revenue of A$61.8 million and net income of $3.2 million.
After a difficult first half of 2019, Patersons expects to break even by year end, with annualised net revenue of approximately $52 million.
Patersons’ wealth management business currently has more than 100 investment advisors with more than $13 billion in funds under management.
Canaccord became a major player in the investment banking arena in 2010, when independent Canadian brokerage Canaccord Financial Inc acquired the interests of Genuity Capital Markets for $314 million.
The buy-out was designed to broaden Canaccord’s reach beyond its traditional base in equity underwriting into mergers and restructuring, where Toronto-based Genuity had focused its growth.
Today’s Patersons announcement follows some serious window shopping in recent months by Canaccord and its Melbourne-based consultant EM Advisory for potential deals within the Australian wealth management sector.
Canaccord is already well-known for its connections with Kogan.com (which it helped float in 2016), Tawana Resources (now Alliance Mineral Assets) and Think Childcare, as well as its ability to quickly and efficiently raise capital.
Earlier this month, Canaccord – through the UK and European division – completed the $51 million purchase of UK-based Thomas Miller Wealth Management.