Feb 27, 2023
Canaccord Is Worth More Than Management’s Buyout Offer, RBC Says
, Bloomberg News
(Bloomberg) -- A committee of Canaccord Genuity Group Inc.’s board said it’s opposed to a management buyout of the firm and has hired Barclays Plc to help explore other transactions.
A group led by Chief Executive Officer Dan Daviau and Chairman David Kassie offered C$11.25 a share in early January to take over the company, saying it would be better off in private hands given Canaccord’s volatile earnings. But the Canadian financial firm is worth as much as 40% more than that offer, according to an assessment done for a special committee of the board by Royal Bank of Canada.
That committee, led by former Canadian Imperial Bank of Commerce executive Gillian Denham, said Monday it plans to recommend the board reject the C$1.13 billion ($834 million) management buyout and that Barclays will “commence an alternative transaction process” that will “explore potential strategic alternatives to enhance shareholder.”
Canaccord rose 1.3% to C$11.58 at 10:42 a.m. in Toronto. The shares have climbed 38% this year.
The RBC assessment, which says Canaccord should be worth C$12.75 to C$15.75 per share, throws a wrench into a deal that would remove one of Canada’s last sizable independent investment dealers from the Toronto Stock Exchange.
While the buyout group controls 21% of the company’s shares, its cash offer is conditional on it getting at least 75%.
The most valuable part of Canaccord its its Canadian wealth-management business, which has about C$35 billion in client assets. RBC’s opinion is that business alone is worth C$810 million to C$941 million. In documents filed Monday, the management group said that’s an “unrealistic multiple” for the wealth business, and that the RBC valuation is flawed.
RBC used a “theoretical ‘sum of the parts’ methodology” to come up with its range, the group said in a statement. Giving a valuation to each unit separately, as though the company were being broken up, fails to account for the interdependence of the divisions or the tax implications involved in a breakup, the group said.
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