Rockwater Capital Corp. announced today that it has reached a cash and stock deal for investment management firm KBSH Capital Management Inc.
Rockwater also announced it plans to consolidate its stock on one-for-10 basis.
KBSH has $6.3 billion in assets under management for pensions, institutions and other clients.
Under the agreement with KBSH, Rockwater will pay $32.5 million in cash and issue about 30.3 million Rockwater common shares over three years, $21.75 million worth of preferred shares and $25 million in subordinate debt to KBSH shareholders. On Thursday, Rockwater common shares closed at 71¢, down 3¢.
Rockwater said it has financed the cash requirement of the transaction through bridge financing arranged by a major Canadian chartered bank. The firm will pursue a common equity offering “as soon as possible” to repay the bridge financing and subordinate debt.
Rockwater said the deal is expected to immediately add to earnings, but the firm reserves the right to adjust the price within one year by up to $20 million, depending on performance.
“The acquisition of KBSH is consistent with our strategy and is an important step towards fulfilling our stated objective of building a high-growth independent diversified financial services company,” Robert Schultz, chairman of Rockwater, said in a news release.
CEO William Packham said the deal will boost Rockwater’s total client assets to $12.1 billion.
“KBSH will serve as Rockwater’s key platform to drive participation in the consolidation of the asset management industry,” he said.
Peter Pennal will remain as president and CEO of KBSH and will join Rockwater’s executive committee.
Rockwater said the deal is still subject to regulatory approvals and standard closing conditions.
The firm also announced that it plans to consolidate its shares on a one-for-10 basis. Shareholders will vote on the idea at a special meeting December 22.