Scotiabank (NYSE: BNS) said Monday it has agreed to acquire the remaining shares it does not already own in investment management firm DundeeWealth (DW on the TSX) in a $3.2 billion deal, in a bid to expand the bank's wealth management presence in Canada.
Scotiabank, which currently owns 18% of DundeeWealth, is offering a value of $21.00 per share, in a deal that has the potential to make Scotiabank the fifth largest mutual fund provider in Canada, based on figures reported by the IFIC.
The Canadian bank, with more than $523 billion in assets, said the acquisition will enhance its presence in the third-party advisor channel, as well as boost products and sales support across the branch network.
The deal will give DundeeWealth shareholders 0.2497 of a Scotiabank common share and, at the choice of each shareholder, either $5.00 in cash or 0.2 of a $25.00, 3.70% five-year rate reset Scotiabank preferred share for each DundeeWealth common share.
Prior to closing, DundeeWealth shareholders will also receive a special distribution of $2.00 per share in cash, as well as an interest in Dundee Capital Markets. For the portion not already owned, the acquisition will cost Scotiabank $2.3 billion.
ScotiaFunds ranked number one in total net sales amongst Canadian schedule one banks in fiscal 2010, and DundeeWealth is the best selling and top performing independent wealth management group in the Canadian marketplace,
said Scotiabank president and CEO Rick Waugh.
Together we will provide clients, advisors and shareholders with even greater value.
The deal has already been recommended to DundeeWealth's shareholders by its board, and Scotiabank said it has entered into a lock-up agreement with Dundee Corp, the largest shareholder of DundeeWealth with a 48% stake.
Non-executive chairman of DundeeWealth and sub-advisor, Ned Goodman, will continue his role, as will president and CEO David Goodman.
DundeeWealth currently oversees $78.5 billion in fee earning assets, and provides alternative and tax-advantaged products, capital markets and advisory services, and wealth management through independent financial advisors across Canada. The company was up more than 6% on Monday, trading at $20.69 as of 10:38am EST.