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Jun 17, 2019

GMP shares surge as Stifel agrees to buy capital markets unit for $70M

GMP shares see lift from sale of capital markets unit to Stifel

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Stifel Financial Corp. (SF.N) agreed to buy GMP Capital Inc.’s (GMP.TO) advisory and trading business for about $70 million, adding the core unit at one of Canada’s last publicly traded independent securities firms.

“We are merging with the best small-to-mid-cap house in the world, so the fit both culturally and product and services-wise, couldn’t be better,” GMP Capital Chief Executive Officer Harris Fricker said Monday in a phone interview. “Given our Canada-centric focus and the fact they don’t have any operations or personnel in Canada, it was a dream deal for our people.”

GMP Capital has traditionally focused on providing investment banking to small-to-midsize resource companies and, more recently, targeted blockchain and cannabis firms. The Toronto-based company has struggled in the past decade amid an industrywide slowdown in energy and mining and increased competition from larger Canadian banks, circumstances that have led to closures and takeovers of other independent securities firms.

GMP Capital’s stock, which once traded as high as $28, in 2006, rose 5.9 per cent to $2.14 at 12:05 p.m. in Toronto. Stifel rose 1.1 per cent to $57.23 in New York trading.

The cash purchase by Stifel gives the St. Louis-based firm a foothold into Canada to diversify a business in which nearly 95 per cent of revenue comes from the U.S. GMP Capital’s market value is about $162 million, while Stifel’s is more than $4 billion. The deal excludes GMP Capital’s 33 per cent stake in the Richardson GMP money-management firm and its U.S. cannabis business, the companies said in statements Monday.

‘Strong Endorsement’

Fricker said he’s joining Stifel as a managing partner for Canada, and the entire capital-markets business in Canada and the U.K. will move over in a deal that’s getting “strong endorsement” from the firm’s capital-markets leaders.

“If you’re a banker, suddenly you’ve got leveraged-finance products, lending products, cross-border M&A, a financial-sponsor practice and a research foundation that covers 1,300 stocks in the U.S. and 700 in Europe,” Fricker said of the deal. “If you’re a banker, your toolbox just got vastly expanded and your ability to be relevant to your clients got transformed.”

GMP Capital said it plans to focus on wealth management after the deal with Stifel, and is in talks to buy 100 per cent of Richardson GMP, which has assets of about $30 billion. James Richardson & Sons Ltd., based in Winnipeg, and Richardson GMP’s advisers own the two-thirds of the Toronto-based wealth manager GMP Capital doesn’t already have.

“We’re going to spend some money to acquire some assets around that business that will help our retail franchise,” GMP Capital Chairman Don Wright said in an interview, adding that such “peripheral business” could include asset managers. “We’re really going to make a big push towards enlarging that operation.”

--With assistance from Derek Wallbank.