National Bank Financial Group has acquired a 12.5% fully diluted equity interest in Wellington West Holdings Inc. in which it will pay Wellington West $35.8 million, or $54.40 per share.

This price is the same as Wellington West’s recently completed $12.5 million share rights offering with its shareholders. In addition, Wellington West will be entitled to receive a capital contribution from National Bank Financial Group up to an additional $35 million, or the equivalent of $53.10 per share, if it achieves certain earnings targets over the next three years.

As part of the overall transaction, National Bank Financial Group has a right to acquire up to an additional 5% of Wellington West’s equity in the event that existing shareholders wish to sell their shares from time to time. Purchases of the additional 5% will be done at pricing, which is based upon Wellington West’s future share issuance transactions.

Completion of the transaction is subject to a number of conditions, including certain regulatory approvals and the adoption of a new shareholders agreement by holders of at least two-thirds of Wellington West’s shares. Closing of the transaction is expected in mid-October.

“This is a turning point in the history of Wellington West,” said Charlie Spiring, founder and CEO, Wellington West Holdings, Inc. “Fifteen years ago we opened a boutique investment firm in Winnipeg and seven years ago we made the leap to grow nationally. Today, we are a coast-to-coast full-service wealth-management firm with a clear shot at becoming the top independent firm in the country. Through it all, we have never lost our deeply entrepreneurial spirit and our commitment to first-class client service and personal attention.”

“Our investment reflects National Bank Financial Group’s commitment to invest in wealth management businesses across the country and expand our distribution alternatives, even in the current challenging market environment,” said Luc Paiement, executive vice president of wealth management of National Bank Financial Group and co-president and co-CEO of National Bank Financial Inc. “We have tremendous respect for what Charlie has achieved in building one of Canada’s premiere wealth management firms and we have great confidence in Wellington West’s growth potential and leadership within the independent space.”

“This capital will allow us to do more of what we do best,” added Kish Kapoor, President, Wellington West Holdings Inc. “We will continue to aggressively recruit more top investment advisors and pursue more corporate finance opportunities. When taken together with our recent rights offering, we are exceptionally well positioned for future growth.”

Wellington West will continue to operate independently under the leadership of its senior management team, led by Spiring and Kapoor.

The investment provides National Bank Financial Group with certain rights, including the right to prevent dilution through the purchase of additional shares in the future. Wellington West has also granted National Bank Financial Group a right of first refusal in the event that Wellington West decides to pursue certain transactions, such as a sale of its business or a sale of a substantial block of its shares. National Bank Financial Group will also have a representative on the Wellington West board of directors. National Bank Financial Group must maintain certain minimum ownership levels in Wellington West in order to preserve its rights.

Clients of Wellington West have long benefited from the firm’s association with National Bank Financial Group’s Correspondent Network for back office and custodial services. In connection with the investment, Wellington West has made a five-year commitment to continue its relationship with Correspondent Network.

Recently, Wellington West began offering personal banking services to its clients through National Bank Financial Group’s partnership banking division. The transaction will allow Wellington West to expand the program further.