GMP Private Client L.P. and Richardson Partners Financial Ltd. have agreed to combine their respective wealth management businesses, the firms said Thursday.
The new wealth management enterprise will operate under the name Richardson GMP Ltd.
The merged firm will have assets under administration of more than $11 billion among 114 investment advisory teams. It will have offices located in 17 cities across Canada, including Montreal, Ottawa, Toronto, Winnipeg, Edmonton, Calgary and Vancouver, with nearly 300 capital market and wealth management professionals.
James Werry, current CEO and president of GMP Private Client L.P., will become Richardson GMP’s CEO, and Sue Dabarno, current president and CEO of Richardson Partners Financial Ltd., will become executive chairman of Richardson GMP.
Concurrently, James Richardson & Sons, Ltd., the parent company of Richardson Partners, will subscribe for approximately $86 million worth of common shares of GMP Capital Inc., the parent company of GMP Private Client L.P.
Together with the common shares of GMP Capital to be issued in connection with the creation of Richardson GMP, the stake controlled by James Richardson & Sons is expected to represent 12% of GMP Capital’s outstanding common shares.
Upon completion of the transactions, GMP Capital and Richardson Financial Group, a subsidiary of James Richardson & Sons, will each own stakes of 35% in Richardson GMP, with the 30% balance being held by Richardson GMP’s investment advisory and management teams.
The combination creates an independent investment firm focused on servicing the capital markets and wealth management needs of entrepreneurs and high-net-worth Canadians, GMP executives said in a conference call on Thursday.
“The combination of our two firms, through this transaction, marks a shift for the wealth management industry in Canada,” said Werry. “Together, we expect to be an extremely strong brand.”
Kevin Sullivan, CEO of GMP Capital, said the transaction was part of GMP’s broader growth strategy. The company began exploring strategic opportunities in the wealth management business when financial markets weakened late last year, he said.
“This transaction will allow us to accelerate the execution of our growth strategy, which has always been to grow our assets under management businesses,” said Sullivan. “We recognize the need for scale in order to drive profitability.”
The two firms fit well together since they share similar client philosophies, similar cultures, and business models that are nearly identical, according to Sullivan.
“Working together will allow both firms to more effectively achieve their common goals,” Sullivan said. “The combined entity will have greater scale, significant synergies, a combined talented management team, and as importantly, will result in the elimination of a tough competitor.”
Sullivan said he expects the synergies to result in cost savings of $10 million to $12 million. With the company’s brokers set to be integrated into the GMP platform by November, he expects the new company to be profitable in 2010.
“We recognized that this is an opportunity for both firms to participate in the acceleration of a shared vision to create Canada’s leading independent investment firm,” said Hartley T. Richardson, president and CEO of James Richardson & Sons, Ltd., in a statement.
“Together, we intend to create exclusive wealth management solutions and innovations. We are confident the combined management team will further our goal of building Canada’s pre-eminent, wealth management business, in addition we look forward to complementing GMP’s core business with our extensive global relationships developed over 152 years,” he said.
The transactions have been approved by the board of directors of GMP Capital, Richardson Partners Financial Ltd. and James Richardson & Sons, Ltd.
Closing is expected to occur in late October, subject to receipt of all necessary corporate and regulatory approvals.
GMP Securities L.P. is acting as financial advisor to GMP with Goodmans LLP as its legal advisor. Blair Franklin Capital Partners Inc. is acting as financial advisor to James Richardson & Sons, Ltd. with Blake, Cassels & Graydon LLP as its legal advisor.
IE