Independent investment dealer Canaccord Financial Inc. (TSX:CF) is buying Genuity Capital Markets, an advisory and restructuring firm, for about  $285.9 million, in a mix of cash and shares.

The firms announced Thursday that Canaccord will acquire 100% of Genuity for 26.5 million of its common shares and $30 million in cash. In addition, the vendors will receive up to $28 million as a working capital adjustment subsequent to closing. All of the Canaccord common shares issued as part of the purchase price will be placed in escrow at closing and released over five years. 

“Canaccord’s acquisition of Genuity more than satisfies our stated acquisition criteria: the Genuity partners are an excellent strategic and cultural fit with our business, and this transaction is immediately accretive to shareholders, increasing Canaccord’s trailing 12-month EPS on a pro-forma basis by more than 15%,” stated Paul Reynolds, president and CEO of Canaccord..

“Canaccord and Genuity have each built strong independent businesses, and we have enormous respect for each others’ accomplishments as well as a shared vision of how best to serve our clients. Our combination will propel us into the next phase of our growth, and position us as an aggressive, full-service competitor,” Reynolds added.

The combined capital markets operations in Canada, the United States and the United Kingdom will be renamed Canaccord Genuity on closing.

Genuity’s 10 largest partners have entered into employment agreements that will become effective on closing, and they will also enter into non-competition, non-solicitation and standstill agreements. All of the other Genuity partners are expected to become Canaccord Genuity employees.

“We are excited to join Canaccord’s strong global platform,” said David Kassie, Chairman and CEO of Genuity. “Like Canaccord, Genuity is a producer owned and driven business. Our firms share a deep commitment to creating long-term value for our clients and shareholders, and I look forward to our combination and continued success.”

In the combined firm, Canaccord’s Reynolds, Mark Maybank and Brad Kotush will continue as president and CEO, chief operating officer, and chief financial officer, respectively. Maybank will also continue to serve as global director of research.

Canaccord’s Jens Mayer and Genuity’s Ted Hirst will serve as global co-heads of investment banking. Genuity’s Daniel Daviau will be head of Canadian investment banking. Genuity’s Earl Rotman will be appointed vice chairman, investment banking, and Barry Goldberg, also from Genuity, will be global head of mergers, acquisitions and restructuring. Canaccord’s Matthew Gaasenbeek will be global head of sales and trading.

Upon closing, Canaccord will appoint two nominees of the existing Genuity partnership — Kassie and Philip Evershed — to its board of directors. Kassie will serve as Canaccord’s group chairman while Peter Brown will serve as chairman and founder.

Completion of the transaction is subject to a number of conditions including the receipt of regulatory and Toronto Stock Exchange approvals, and it must also be approved by Canaccord’s shareholders.

Canaccord expects that the transaction will be immediately accretive to earnings. Founded in 2005, Genuity had $100.6 million in revenue and $31.9 million in pre-tax net income for its fiscal year ended Jan. 31. It has 135 employees and offices in Toronto, Vancouver, Montreal, Calgary, Boston and New York.

IE