Dundee Wealth Management Inc. is merging with StrategicNova Inc. to form a new company, with more than $7.9 billion in mutual fund assets under management at the end of last month.

The companies will be combined in a holding company comprising all of the existing assets of Dundee Wealth (Dundee Securities Corporation, Dundee Insurance Agency Ltd. and Dundee Private Investors Inc.) and StrategicNova. Along with Dundee’s acquisition of Canadian First Financial Group Inc., Ross Dixon Financial Services Ltd. and Hewmac Investment Services Inc., the new holding company will have about $18 billion in assets under management and administration and more than 560 financial advisors.

According to the Investment Funds Institute of Canada, Dynamic had $5.7 billion in mutual fund assets at the end of June, while Strategic Nova had $2.24 billion. The companies’ combined fund assets would make it the 16th largest fund company by assets.

Dundee shareholders will own 81.7% of the combined firms, with StrategicNova’s owner, CDP Capital, taking an 18.3% stake after converting its existing stake and loans of StrategicNova into equity, and kicking in another $15 million in cash. CDP also has an option to acquire another 1.15% of the new firm for $10 million.

In a conference call that was short on hard numbers, the main players in the deal refused to put a value on the deal itself, or on the synergies it expects to realize as part of this transaction. André Bourbonnais, president CDP Capital, put the carrying value of its investment in StrategicNova at between $60 million and $105 million. But the executives resisted any attempts to put a number on the deal.

The deal is not expected to close until September. Executives also remained tight-lipped about how many layoffs may result, or how the fund lineups may change. However, it was suggested that there would be fund mergers, which may ultimately result in lower costs to unit-holders.

The new holding company that will combine the two firms has no name as yet, although it is expected that the Dynamic brand will remain for the funds. The StrategicNova brand may disappear.

“This transaction is important for Dynamic because it expands our reach, and builds our position as a powerful wealth management provider,” said David Goodman, president and CEO of Dynamic. “These two organizations are a strong complement to one another, which will lead to significantly increased annual free cash flow, lower costs for unit-holders and increased product depth. Once this transaction is complete, unit-holders of the funds will also benefit from increased product choice and free switching between funds.”

“We sought a capable partner with a strong Quebec history and presence. We strongly believe in the overall ability of Dynamic’s management team to grow the combined entity.” said Bourbonnais, referring to Dynamic’s roots, which date back 45 years when it started as an investment club ihn Montreal. Dynamic and parent Dundee are based in Toronto.

“I am very pleased that StrategicNova will ally itself with Dynamic, a company that not only complements our activities but also has strong ties with Quebec,” said Marie Desroches, president of Montreal-based StrategicNova. “Over the past year, we have laid a foundation that will enable us to make a positive contribution to Dynamic’s growth. This merger will provide real value for our employees, clients and financial advisors. Not only will they have access to a broader range of products, but Dynamic offers them a highly recognizable brand name and an excellent performance record.”

Ned Goodman, CEO and controlling shareholder of Dundee, noted that the firm continues to work toward a banking licence, and said that he hopes this deal will speed up the approval process.


Dan Hallett, senior investment analyst with Sterling Mutuals Inc. says he does expect some unit-holder benefit in terms of cost reductions, although he doesn’t imagine it will be big.

“Remember, management fees aren’t reduced when funds grow in size. Operating expenses are the only component of the MER that really has potential to fall. With operating expenses typically in the 30 to 50 basis point range, there isn’t as much room as many perceive for cost efficiencies. But, something is better than nothing.”

Hallett expects that any overlapping funds will be merged, while unique StrategicNova funds may be renamed.

Hallett said that the deal didn’t come as a surprise. “While there isn’t a long history of Dynamic acquiring other fund companies, it’s clear that Dynamic likes bottom fishing,” he notes. And, the rumour mill has had StrategicNova on the block for some time.