The Street's Take on Manulife

by: Streetwise Blog

By Andrew Willis

Canada’s bank-owned dealers stand to earn the lion’s share of fees from Manulife Financial’s (NYSE:MFC) massive stock sale on Wednesday.

Manulife staged a bought deal financing that saw Scotia Capital and RBC Dominion lead a syndicate of underwriters that bought $2.5 billion of equity. The investment dealers have an option to bump the financing up to $2.8 billion if there’s investor demand, and with Manulife shares being sold at a 6% discount to where they closed Wednesday on the TSX, there is likely to be all kinds of demand.

Manulife plans to use $1 billion of the money it raised to pay down a credit facility struck last year, during the market’s worst days, with a syndicate of Canadian banks. Keep that in mind as we list the major players in this underwriting.

Manulife will pay the Street a 3.5% fee for buying this stock and selling it to their investor clients, according to investment banking sources. That’s a small concession to Manulife, as dealers typically charge a 4% commission on these equity sales. At a minum, the insurer will pay the dealers $87.5 million.

Scotia Capital and RBC Dominion will each take 25% of the fixed commissions on the transaction. CIBC World Markets ranks next, with a 12% share of the fee pie. BMO Nesbitt Burns gets a 10% slice, TD Securities (NYSE:TD) will get 9% and National Bank Financial is to receive 7%.

Most of the commission pie is now gone, and only the six bank-owned firms got fed.

Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), HBSC Securities, BofA/Merrill Lynch (NYSE:BAC), UBS Securities (NYSE:UBS) and Morgan Stanley (NYSE:MS) each get 1.5% of the fees. Canaccord Capital (OTC:CCDPF) gets 1% and Laurentian Bank Securities (OTCPK:LRCDF) gets 0.5%.