Source: The Canadian Press
Sprott Inc. stock jumped Wednesday after the investment firm (TSX:SII) announced it has agreed to acquire a California-based, resource-oriented financial services firm that manages US$1.3 billion of client assets.
The Toronto-based company’s shares gained 9% on Wednesday, pushing up the value of an all-stock deal that was worth C$90 million to C$125 million when it was announced before markets opened.
The acquisition of Rule Investments Inc. includes its flagship operation Global Resource Investments Inc., a full service U.S. brokerage firm that specializes in natural resource companies in the United States, Canada and Australia.
It also includes Rule’s relatively new Terra Resource Investment Management, founded in 2006, which provides segregated managed accounts for institutions and wealthy individuals.
Sprott — a prominent name in Canada’s investment community — says the acquisition will allow it to leverage Sprott’s products and brands in the United States and internationally.
“We’re both resource-oriented,” Eric Sprott, founder and chairman if the firm that carries his name, said in a conference call with analysts?
“I think this is something that can cause us to accentuate our development in the whole North American market.”
Rule Investments chief Rick Rule will be nominated for the Sprott board.
Rule said the Sprott brand is extremely well-known in the United States but it hasn’t been fully exploited.
“We really look forward to being the footprint for Sprott’s U.S. growth across a range of products,” Rule told analysts on the conference call.
“There are a large number of U.S. retail investors that want to participate in natural resource-based businesses but don’t have the expertise. And I should say that the U.S. financial services market, overall, is underserved in terms of natural resources expertise.”
Sprott’s offer calls for it to issue 20 million of its shares when the deal closes, and up to eight million more in coming years if targets are met. Sprott currently has about 150 million shares outstanding, so the Rule shareholders will own about 12% of Sprott’s equity when the deal closes.
“We would have loved to have done this deal for cash a few months ago but Rick, right from the start, told us he was interested in being a partner in our business. So this is a lot more like a merger than an acquisition from the perspective,” Sprott chief executive Peter Grosskopf said on the call.
The shares closed at $4.50 each on Tuesday, making the offer initially worth about $90 million at closing and up to $125 million if the maximum number of shares are issued.
However, the value of the offer will fluctuate with the price of Sprott shares. They gained 40 cents or 8.9% on the Toronto Stock Exchange Wednesday, although with modest volume of about 250,000 shares.
Sprott to swap $90 million worth of its stock to acquire Rule Investments
Brokerage deal will allow Sprott to leverage its products and brands in the U.S. and internationally
- By: Canadian Press
- September 22, 2010 September 22, 2010
- 15:45