CI/Dundee: Can it work?

By Mark Noble and Romana King | September 25, 2007 | Last updated on September 25, 2007
3 min read

CI’s current bid to purchase DundeeWealth has been rebuked but this hasn’t curbed speculation by analysts about how the two industry players would integrate their different sets of star managers and networks of advisors.

Hypothetically, if Dundee and CI merged, it would become the second largest fund company after IGM Financial and would manage around $84 billion in mutual fund assets. In addition, the company would have more than 3,000 of its own financial advisors available nationally, as well as direct access to several non-affiliated advisors who use CI and Dynamic products.

In an interview with, CI Financial CEO William Holland admits that integrating the two companies does pose challenges.

“I have no idea how we would execute the integration [of Dundee and CI Financial],” he said. “It’s very difficult to say what structure the deal [would produce]. I can say that for the extraordinary price we are offering we would have to cut costs somewhere.”

Efficient cost control is one of CI’s biggest strengths, says industry analyst Dan Hallett. Hallett wonders how this would work since Dundee’s Dynamic Mutual Funds has a reputation for higher-than-average expense controls contributing to a higher-than-average MER on its funds.

Usually CI would cut costs by rolling the funds into its own product line, he says. But with Dynamic Mutual Funds, CI would be acquiring one of the most respected mutual fund brands in the country with some of the hottest fund managers.

“Some of Dynamic’s more successful products and most liked money managers would have to be left alone and allowed to continue their mandates,” Hallett says. “I could be wrong but I don’t see Rohit [Seghal], Dave Taylor and Noah Blackstein being part of the CI signature team. That’s not meant as disrespect to Eric Bushell and CI managers in any way. I’m just not sure I see the cultural fit there.”

Holland disagrees. He says since the mid-1990s, his company has been eyeing Dundee as a takeover target precisely because there are a lot of similarities in governance.

“The [two] businesses are unusually complementary,” Holland says. “Dundee Wealth is of considerable interest as it fits perfectly into our business focus — we have brokers, financial advisors, mutual funds . . . it’s about as perfect [a fit] as you can get.”

Philip Lee, a fund analyst with Morningstar Canada, says CI representatives were essentially relaying the same message to him in a conference call he had on Tuesday.

“What I heard from CI is that there is a lot of similarity in the way the two shops could run, so they think there should be some good synergies there,” Lee says.

Lee also notes that Dynamic has a line-up of higher beta or riskier fund mandates that CI currently doesn’t offer but would like to add to its product suite.

Dundee Bank, which is currently slated to be acquired by Scotiabank, is another unique acquisition that will be a key component to the deal going through. Holland says his company will have to re-examine its share offer if DundeeWealth goes through with the sale of Dundee Bank and 18% of its shares.

“We would roll the business into one another — we are out to acquire 100% of the shares,” he says.

Peter Loach, vice-president and managing director of fund research at BMO Nesbitt Burns, is unsure if or even how the deal could be implemented. But if it can, he says CI’s product line will be one of the best in the industry.

“I don’t think they’ll take some market-share from RBC funds, because most of the sales are at the actual branch level of the bank,” Loach says. “I think they would take a much larger market share because they have such a talented lineup. They should.”

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Mark Noble and Romana King