CI Financial’s assets under management will rise by 16 per cent to $140-billion when the deal to acquire Sentry Investments closes, subject to regulatory approvals.Gary Hershorn
CI Financial Corp. has struck a deal to acquire Sentry Investments Corp., valued at $780-million in cash and stock, merging two of the country's largest independent asset managers.
Through the acquisition, CI will add significantly to its mutual-fund portfolio, boosting its assets under management by 16 per cent to $140-billion. The deal will also create one of the largest sales forces in the industry in Canada.
"Scale is a clear advantage," said CI chief executive officer Peter Anderson. "There are not a lot of large asset managers in the Canadian market today."
The deal comes after a difficult period for the mutual-fund industry amid the growing popularity of exchange-traded funds. While mutual funds still have a strong footing in Canada, investors are increasingly turning to an increasing array of ETFs, which often have lower costs.
Those trends could spur further deals in the investment funds industry.
"It's been pretty quiet for a while," said Scott Chan, an analyst with Canaccord Genuity Corp. "I think this will trigger consolidation in the mutual fund space," Mr. Chan said.
CI has become a larger player in the ETF space, a shift that began with the purchase of First Asset Capital Corp. in 2015. Sentry has yet to enter the ETF business.
The deal, which is subject to regulatory approval, is expected to close on Sept. 30. CI and Sentry plan on combining their sales forces, scale IT and back-office operations and consolidate their shared vendors by 2019. Sentry will remain a standalone brand under CI's ownership and will manage a lineup of more than 45 mutual funds.
Sentry "will be better positioned to embrace industry changes with greater scale and increased access to distribution," said Philip Yuzpe, president and CEO of Sentry, in a statement.
Mr. Yuzpe took the reins at Sentry in January after the previous CEO, Sean Driscoll, stepped down in late 2016 amid an investigation by the Ontario Securities Commission. In April, the OSC ordered Sentry to pay a $1.5-million administrative penalty for providing lavish gifts to representatives at a sales conference in Beverly Hills, Calif., and advisers on other occasions.
The deal with CI had been in the works for months.
"We were approached to participate in a highly confidential auction process for this acquisition," said Sheila Murray, president of CI. "We made an offer and, happily, they accepted."
CI also announced its second-quarter earnings on Thursday as 54 cents per share on total revenue of $510-million. Free cash flow for the company has gone up 5 per cent to $154.8-million from the same time last year. The overall outlook on the earnings call was optimistic.
"The market continues to be challenging, but I'm confident in our team at CI," Mr. Anderson said. "The first half of 2017 was much stronger for CI than the same time last year."