RF Capital doesn’t have the capability to grow their business to scale: Canaccord Genuity CEO
Canaccord Genuity Group Inc. is willing to “substantially” raise its takeover price for RF Capital Group Inc. but can’t get its rival to discuss a deal, Chief Executive Officer Dan Daviau said.
A merger would unite two of Canada’s largest independent firms in wealth management. Canaccord said last month it offered $2.30 a share for RF and was rejected by the board.
“We’re prepared to increase our price substantially, but we don’t know what price they’re looking for because they won’t talk to us,” Daviau said in an interview.
The updated proposal would include improved terms for RF Capital’s investment advisers, Daviau said. He declined to say what price Canaccord would be willing to pay. The current proposal values RF at $367 million (US$292 million).
Canaccord has little prospect of taking control of RF without winning the support of the Richardson family, whose closely held conglomerate, James Richardson & Sons Ltd., owns 44 per cent of RF Capital, according to data compiled by Bloomberg.
RF Capital’s minority shareholders “should be provided an opportunity to consider the proposal,” Canaccord said Wednesday in a written statement. “Canaccord Genuity is exploring legal options available, as well as options of taking our offer directly to RCG shareholders.”
RF Capital shares are up 22 per cent since Canaccord’s interest became public and closed at $2.14 in Toronto on Tuesday.
Canaccord has said that combining the firms would provide RF Capital’s investors with better value for their shares and open opportunities for RF’s wealth advisers. By publicly disclosing the proposal, Daviau is making an open appeal to those advisers, who form an influential bloc within RF because they collectively own 31 per cent of the shares.
RF has repeatedly rejected Daviau’s approach. “After consideration, the Board has again determined that pursuing your proposal is not in the best interests of RF Capital Group Inc.,” RF Chairman Donald Wright said in an April 9 letter posted on the company’s website, without elaborating.
Canaccord’s wealth unit had $85.2 billion in client assets as of Dec. 31, according to an investor presentation. RF had $32.7 billion in assets under administration as of March 31.
Until last year, RF Capital operated under the name GMP Capital. It used to be a major player in investment banking and trading in Canada’s junior energy and mining markets, but it sold its capital markets business to Stifel Financial Corp. in 2019 to focus on wealth management and investment advice.