Canaccord Genuity Group Inc. Announces a Proposed Offer Made to and Rejected by The RF Capital Board to Acquire 100% of the Outstanding Shares of RF Capital Group Inc.
If completed, the proposed business combination would form the preeminent independent wealth management business in
Unfortunately, RF Capital's board of directors dismissed the Proposal on
"We are resolute in our belief that our Proposal would provide superior value for RF Capital shareholders and that
We are disappointed that we have been unable to engage with RF Capital's board of directors and the Richardson family in a meaningful and productive way in connection with our Proposal, despite numerous attempts to engage in constructive dialogue since last September. We feel strongly that RF Capital shareholders and
We believe the Proposal presents an opportunity to form the preeminent independent wealth management business in
Benefits of the Proposal
- As two of the largest and longest-standing independent wealth management businesses in
Canada, Canaccord Genuityand Richardson Wealth on a combined basis, with their strong complement of IAs and their shared commitment to their clients, would be well-positioned to serve the complex needs of Canada'smost successful entrepreneurs, other ultra/high-net worth investors as well as a diverse population of private clients.
Canaccord Genuityhas a proven track record of creating substantial value in the wealth management segment and, over the past ten years has invested more than $350 millionin acquisitions, recruiting, and technology to support the growth of its wealth management businesses in Canada, the UK& Crown Dependencies and Australia. The combined business would benefit from this investment in value creation.
Canaccord Genuityis entrusted with $88 billionin client assets globally (as at February 28, 2021), up from $32 billionin 2015. Excluding significant items, our aggregate global wealth management businesses earned pre-tax net income of $90 million1 for the nine-month period ended December 31, 2020. The combined business would benefit from our global platform and experience operating across multiple regions.
- With the benefit of more than six consecutive years of substantial growth in revenue and profitability,
Canaccord Genuityhas made significant investments to advance the support infrastructure, technology and product offering to keep pace with the changing industry landscape, while striving to exceed Investment Advisor and client expectations. Investment Advisorsand clients of the combined business would also benefit from our infrastructure and technology investments and product offering, such as a state-of-the-art unified account management platform, powered by Envestnet.
Investment Advisorsin Canadaare increasingly choosing Canaccord Genuity Wealth Management as their platform to pursue the most productive years of their career. We have effectively doubled our client assets in Canadaover a three-year period, having successfully recruited over 45 IA teams, collectively managing more than $11 billionin client assets. Among them, we have welcomed 14 IAs from Richardson Wealth who collectively manage over $3 billionin client assets. We believe such growth would continue or could even accelerate based on the strong complement of Investment Advisorsof the combined business.
Investment Advisorswho have joined Canaccord Genuityhave been able to grow their practices by leveraging the modern technology, expanded product offering, and opportunities provided by our capital markets business, which is a leading equities underwriter in Canada. We believe that as part of a combined business, former Richardson Wealth Investment Advisors would have an opportunity to grow their practice in a similar fashion.
- Although RF Capital has underperformed in terms of its financial record, the proposed business combination would result in significant cost savings, as well as revenue opportunities for the combined business, which we expect will be accretive to
Canaccord Genuityearnings per share.
- The expanded wealth management platform in
Canadawould provide Canaccord Genuity'sshareholders with an added benefit which complements their exposure to a diverse geographic and business mix, with growing contributions from a stable and growing international wealth management business, and significant upside during periods where our capital markets businesses are positioned to deliver outsized returns. The value of Canaccord Genuitycommon shares has increased by 139% over the past 12 months.
RF Capital's Refusal to
- RF Capital has underperformed as a public company, with a current market capitalization of approximately
$275 millionand a float of approximately $80 million.
- Over a five-year period, the market price of RF Capital common shares has declined by 62%, whereas the price of
Canaccord Genuitycommon shares has increased by 135% over the same period.
- Over a five-year period,
Canaccord Genuityhas seen its average assets under administration ("AUA") per IA team in Canadagrow by 215%, whereas Richardson Wealth advisors have achieved substantially lower growth of 37%. This difference in growth rates reflects our unwavering commitment to investing in the growth of our wealth management business.
Richardson Wealth Investment Advisorssold their Richardson Wealth shares for consideration with a headline value of $2.42per share, but with RF Capital common shares trading below $2.00since the RGMP Transaction closed in October 2020, we believe that it is unlikely that they will be able to realize that value in any reasonable time frame.
- The refusal by the RF Capital board to engage in discussions about the Proposal prevents
Richardson Wealth Investment Advisorsfrom an opportunity to participate in a transaction which would have provided the potential to create significant value for their shares accumulated over many years of service and, with a multi-year escrow, their ability to realize value is restricted and limited.
The full text of the letter sent to RF Capital on
Dear Mr. Wright,
On behalf of
Proposed offer for RFG common shares
We propose to pay
We would expect that the RFG board would permit holders of shares that are currently subject to escrow provisions to accept our proposal, with the understanding that a portion of the consideration they receive would be subject to equivalent escrow provisions.
Proposed exchange of RFG preferred shares
As part of our offer, we also propose to exchange RFG's outstanding preferred shares into equivalent preferred shares of
Highly accretive combination, substantial value creation and track record for growth
We are confident that the highly accretive combination of RFG's Richardson Wealth business with our existing wealth management platform, which will form the preeminent independent wealth business in
We note from your financial results released on
It is our strong preference to arrive at a transaction supported by the board of directors of the Company. To that end we would propose entering into a non-disclosure agreement that would permit us to conduct a limited confirmatory due diligence review of the Company, which we are confident could be completed in less than 14 days, following which we would seek to enter into appropriate definitive agreements regarding an agreed transaction. However, if we are unable to negotiate promptly an appropriate non-disclosure agreement (for certainty, one that does not include standstill or non-solicitation provisions), we are prepared to proceed unilaterally with an offer directly to your shareholders.
Our Board of Directors is fully supportive of this initiative and has authorized and approved the submission of this letter. To date, other than attempting to contact representatives of Richardson, we have not had discussions with RFG's major shareholders regarding our proposal but, in the event that the RFG board elects not to engage with us, we reserve the right to do so.
This letter does not represent or create any legally binding or enforceable obligations. No obligations will be imposed on either party unless and until a definitive agreement is signed by both
We are prepared to move quickly and look forward to discussing this opportunity further. We urge a timely response and encourage you to give this request a favorable consideration. As you can appreciate, time is of the essence. Accordingly, we request that you respond to us by
President & Chief Executive Officer
This press release does not constitute an offer to buy or an invitation to sell, or the solicitation of an offer to buy or invitation to sell, any securities of RF Capital or
Through its principal subsidiaries,
CAUTION REGARDING FORWARD-LOOKING STATEMENTS:
This press release may contain "forward-looking information" as defined under applicable securities laws ("forward-looking statements"). These statements relate to future events or future performance and reflect management's expectations, beliefs, plans, estimates, intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts, including the Proposal, the business and economic conditions and
Client assets include Assets under administration (AUA) and assets under management (AUM) which are non-IFRS measures that are common to the wealth management business. Client assets reflect the market value of securities and funds managed and administered by the Company from which the Company earns commissions and fees. This measure includes funds held in client accounts as well as the aggregate market value of long and short security positions. The Company's method of calculating AUA and may differ from the methods used by other companies and therefore may not be comparable to other companies. Management uses these measures to assess operational performance of the Canaccord Genuity Wealth Management business segment. The value of AUA and AUM will change with changes in market values and foreign exchange rates.
1 Items excluding significant items are non-IFRS measures. Refer to non-IFRS measures in our annual MD&A for fiscal 2020 and our quarterly MD&A for the nine months ended
View original content:http://www.prnewswire.com/news-releases/canaccord-genuity-group-inc-announces-a-proposed-offer-made-to-and-rejected-by-the-rf-capital-board-to-acquire-100-of-the-outstanding-shares-of-rf-capital-group-inc-301246986.html