Toronto-based GMP Capital Inc. has revised the terms of its deal with Winnipeg-based Richardson Financial Group to buy all shares of Richardson GMP.
The definitive purchase agreement announced today is the culmination of the negotiations between the two firms since the transaction was announced in February.
Under the new agreement, GMP will acquire the common shares of Richardson GMP it doesn’t already own for 1.875 common shares of GMP Capital per common share of Richardson GMP.
Under the February agreement, the terms were two shares of GMP Capital for every one of Richardson GMP. The revised deal is based on a revaluation of Richardson GMP at $420 million, compared with $500 million under the February deal.
“The revised terms to the previously announced transaction in February 2020 strike what, we believe, is an appropriate balance,” said Donald Wright, chairman of the board of GMP Capital, in a release. He said the valuation took into account the effects of the Covid-19 pandemic, stakeholder feedback and “retaining the appropriate level of capital to execute our long-term value creation strategy.”
GMP Capital will also pay a special dividend of $11.3 million or 15 cents per share to the pre-closing GMP shareholders.
Richardson Financial agreed not to redeem its $32-million preferred share ownership in Richardson GMP for cash on closing to “bolster GMP and RGMP’s already strong balance sheets” and “to fund growth opportunities,” according to the release. Richardson Financial Group will instead have the right to redeem preferred shares for cash following the third anniversary of closing.
The announcement of the revised purchase agreement followed the signing of a non-binding term sheet by GMP Capital and Richardson Financial Group, which was extended in April due to the pandemic. According to the release, the revised agreement followed consultation with the RGMP investment advisors, a new formal valuation and the recommendation of the independent special committee of GMP’s board of directors.
After the transaction, GMP will have an estimated 182.3 million common shares issued and outstanding. Richardson Financial Group, which currently owns 24.1% of the common shares of GMP Capital, will have an estimated aggregate ownership position of approximately 40.0% following the deal. Existing GMP Capital shareholders (other than Richardson Financial Group) and Richardson GMP advisors will hold 31.4% and 28.5%, respectively, of GMP common shares.
Richardson GMP has $28.3 billion in assets under administration (AUA), down modestly from $28.6 billion on Feb. 26, but up significantly from March, when AUA dropped to $23.5 billion. The firm also has 165 advisory teams, up from 162 on Feb. 26.
GMP Capital noted that after the transaction closes, it intends to deploy “the considerable capital” at both GMP and Richardson GMP “to accelerate the growth of the wealth management business.”
“The success of our long-term partnership with some of Canada’s top advisors is validated by this transaction as we remain focused on building a firm that is focused exclusively on serving the complete wealth management needs of Canadian families,” said Andrew Marsh, president and CEO of Richardson GMP, in the release.
Last year, GMP Capital sold the bulk of its capital markets business to St. Louis, Mo.-based Stifel Financial Corp. in a $70-million cash deal in order to focus on its wealth management business.