Scotiabank’s deal to acquire independent investment firm Jarislowsky Fraser for $950 million is part of the bank’s strategy to move beyond retail investing, one of the bank’s executive says.
Almost 80% of Scotiabank’s business has been in retail investing, with the rest split between institutional and private investment counsel, Glen Gowland, Scotiabank’s senior vice-president and head of asset management, told Advisor.ca Monday.
Jarislowsky Fraser represents almost the exact opposite, said Gowland, with 80% of its business in institutional investing and the rest in ultra-high net worth.
Having an institutional platform has been a strategic priority for Scotiabank for the last few years, he said.
Montreal-based Jarislowsky Fraser manages more than $40 billion in assets for institutional and high-net-worth clients, a Scotiabank release announcing the deal said.
The combination of Jarislowsky Fraser and Scotiabank’s asset management business creates the third‐largest Canadian active asset manager, with $166 billion in assets under management (as of Dec. 31, 2017), the release said. The transaction is expected to close in the fiscal third quarter of 2018, subject to regulatory approvals.
Gowland confirmed that no job losses will result from the acquisition.
“We are committed to continuing to grow,” he said. He noted that over the last year, Scotiabank has added to its 1832 investment team, including analysts and portfolio managers. “It’s critical for us to keep all of our talent at Jarislowsky Fraser, and certainly continue to build here as well.”
The acquisition won’t result in significant changes for Jarislowsky Fraser. “We want to maintain the integrity of all their processes,” said Gowland, referring to investment management, including ESG investing. “That’s what you’re buying.”
He adds that the bank’s scale will allow the firm to continue to grow, potentially receiving the benefit of things such as investment in technology and operations.
The deal received unanimous support from Jarislowsky Fraser’s partners, who have agreed to invest half their proceeds from the closing of the transaction into Jarislowsky Fraser’s investment strategies, the release said. Firm founder Stephen A. Jarislowsky will continue his association with the business, which will continue to carry his name and retain investment autonomy. The Jarislowsky Fraser management team will continue to lead its existing business, and its head office will remain in Montreal.
The purchase price payable at closing of about $950 million will be satisfied primarily by the issuance of Scotiabank common shares. An earn-out of up to $56 million in additional Scotiabank common shares may be paid based on achieving growth targets.
Scotiabank intends to offset the dilutive impact of the issuance of common shares by repurchasing a similar amount of common shares under its normal course issuer bid, over the 12- to 18-month period following closing, the release said. The completion of any such repurchases would be subject to regulatory approvals, the suitability of prevailing market prices and prudent capital management. Following the completion of these repurchases, Scotiabank expects the transaction to be accretive to earnings in fiscal year 2020.