Readers are referred
to the section "Forward-Looking Statements" at the end of this
release. All figures are expressed in Canadian dollars.
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MONTRÉAL, May 3, 2021 /CNW/
- Wealthsimple Financial Corp. ("Wealthsimple"), a member of
the Power Corporation group of companies and one of Canada's leading financial technology
companies, issued a press release today announcing it has signed a
$750 million financing round. The
fundraising consists of a $250 million primary offering by
Wealthsimple, as well as a $500
million secondary offering by Power Corporation of
Canada (TSX: POW) ("Power
Corporation" or "PCC"), IGM Financial Inc. ("IGM Financial") and
Great-West Lifeco Inc. ("Great-West Lifeco") (collectively the "PCC
Group") pro-rata to their respective ownership interests. The
transaction is subject to customary closing conditions and is
expected to close by mid-May 2021.
Additional details of the primary offering are disclosed in
Wealthsimple's press release issued earlier today.
The PCC Group is the largest shareholder of Wealthsimple holding
a 62% equity interest, on a fully diluted basis with PCC, IGM
Financial and Great-West Lifeco owning 23.1%, 36.3% and 2.3%,
respectively. The PCC Group's interest represents 76% of the voting
rights. Following completion of the primary and secondary
offerings, the PCC Group will continue to be the largest
shareholder in Wealthsimple with a combined 43% equity interest, on
a fully diluted basis, and 60% of the voting
rights [1]. As a result of the secondary offering,
the PCC Group will receive proceeds of $500
million and will retain an interest valued at $2.1 billion, a total increase in value of
$1.7 billion from December 31, 2020 and $2.3 billion over the PCC Group's invested
capital of $315 million in
Wealthsimple. This represents a multiple on invested capital of
8.3x and a compound annual return on investment of 79% (before
expenses and taxes).
PCC currently holds a 23% equity interest in Wealthsimple, on a
fully diluted basis. PCC will receive proceeds of $187 million ($164
million after-tax) from the secondary offering and will
retain a 16% equity interest in Wealthsimple, on a fully diluted
basis, valued at $796 million. PCC's
retained interest represents, along with proceeds from the
secondary offering, an increase in value of approximately
$633 million, or $0.94 per participating share, from December 31, 2020.
Today, IGM Financial also announced the change in its ownership
interest in Wealthsimple. IGM Financial will receive proceeds of
$295 million ($260 million after-tax) from its pro-rata share
of the secondary offering and will retain an interest valued at
$1.15 billion. Additional details are
disclosed in IGM Financial's press release issued earlier
today.
Wealthsimple is a key part of a portfolio of fintech investments
that the PCC Group has cultivated through Portag3 Ventures
("Portag3"), the venture-capital arm of multi-asset class
alternative investment platform Sagard Holdings. Investments in
organizations such as Wealthsimple enhance the capabilities of
PCC's publicly traded operating companies while giving them
exposure to new markets with favorable secular trends. Through
Portag3, the PCC Group will continue to play an active role in
Wealthsimple's growth through Board membership and support from
Portag3's value creation team.
[1] Including a 3.8%
interest held through a co-investment vehicle managed by Sagard
Holdings.
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Expected Impact of Wealthsimple's Equity Offerings on PCC's
Consolidated Financial Statements [2]
In the first quarter ended March 31,
2021, the revised Wealthsimple valuation will result in a
net increase in the liability related to put rights held by
non-controlling interests and option holders of Wealthsimple of
approximately $200 million recorded through the statement of
earnings and a net carried interest expense of approximately
$41 million.
In the second quarter ended June 30,
2021, pending a successful close of the transaction, the put
rights will be extinguished. Following the close, the primary and
secondary offerings and the extinguishment of the put rights will
result in an increase in participating shareholders' equity of
approximately $0.7 billion recorded
through the statement of changes in equity.
[2] All amounts
disclosed are attributable to PCC participating
shareholders.
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About Wealthsimple
Wealthsimple is a financial company on a mission to help
everyone achieve financial freedom, no matter who they are or how
much they have. Using smart technology, Wealthsimple takes
financial services that are often confusing, opaque and expensive
and makes them simple, transparent, and low-cost. The company was
founded by a team of financial experts and technology
entrepreneurs, and is headquartered in Toronto, Canada. To learn more, visit
www.wealthsimple.com.
About Power Corporation
Power Corporation is an international management and holding
company that focuses on financial services in North America, Europe and Asia. Its core holdings are leading insurance,
retirement, wealth management and investment businesses, including
a portfolio of alternative asset investment platforms. To
learn more, visit www.PowerCorporation.com.
Forward-Looking Statements
Certain statements in this news release, other than statements
of historical fact, are forward-looking statements based on certain
assumptions and reflect the Corporation's current expectations.
Forward-looking statements are provided to present information
about management's current expectations and plans relating to the
future and the reader is cautioned that such statements may not be
appropriate for other purposes. These statements may include,
without limitation, statements regarding the operations, business,
financial condition, expected financial results, performance,
prospects, opportunities, priorities, targets, goals, ongoing
objectives, strategies and outlook of the Corporation, including
the Corporation's fintech strategy, the expected proceeds from the
primary and secondary offerings and the resulting size and value of
the ownership interests of members of the PCC Group, the
extinguishing of the put rights, and the expected impact of matters
on the Corporation's financial statements. Forward-looking
statements include statements that are predictive in nature, depend
upon or refer to future events or conditions, or include words such
as "expects", "anticipates", "plans", "believes", "estimates",
"seeks", "intends", "targets", "projects", "forecasts" or negative
versions thereof and other similar expressions, or future or
conditional verbs such as "may", "will", "should", "would" and
"could".
By its nature, this information is subject to inherent risks and
uncertainties that may be general or specific and which give rise
to the possibility that expectations, forecasts, predictions,
projections or conclusions will not prove to be accurate, that
assumptions may not be correct and that objectives, strategic goals
and priorities will not be achieved. A variety of factors, many of
which are beyond the Corporation's and its subsidiaries' control,
affect the operations, performance and results of the Corporation
and its subsidiaries and their businesses, and could cause actual
results to differ materially from current expectations of estimated
or anticipated events or results. These factors include, but are
not limited to: the impact or unanticipated impact of general
economic, political and market factors in North America and internationally,
fluctuations in interest rates, inflation and foreign exchange
rates, monetary policies, business investment and the health of
local and global equity and capital markets, management of market
liquidity and funding risks, risks related to investments in
private companies and illiquid securities, risks associated with
financial instruments, changes in accounting policies and methods
used to report financial condition (including uncertainties
associated with significant judgments, estimates and assumptions),
the effect of applying future accounting changes, business
competition, operational and reputational risks, technological
changes, cybersecurity risks, changes in government regulation and
legislation, changes in tax laws, unexpected judicial or regulatory
proceedings, catastrophic events, man-made disasters, terrorist
attacks, wars and other conflicts, or an outbreak of a public
health pandemic or other public health crises, the Corporation's
and its subsidiaries' ability to complete strategic transactions,
integrate acquisitions and implement other growth strategies, and
the Corporation's and its subsidiaries' success in anticipating and
managing the foregoing factors.
The reader is cautioned to consider these and other factors,
uncertainties and potential events carefully and not to put undue
reliance on forward-looking statements. Information contained in
forward-looking statements is based upon certain material
assumptions that were applied in drawing a conclusion or making a
forecast or projection, including, without limitation, management's
perceptions of historical trends, current conditions and expected
future developments, as well as other considerations that are
believed to be appropriate in the circumstances, including that the
offerings will proceed as currently contemplated and that the list
of factors in the previous paragraph, collectively, are not
expected to have a material impact on the Corporation and its
subsidiaries. While the Corporation considers these assumptions to
be reasonable based on information currently available to
management, they may prove to be incorrect.
Other than as specifically required by applicable Canadian law,
the Corporation undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which such statement is made, or to reflect the
occurrence of unanticipated events, whether as a result of new
information, future events or results, or otherwise.
Additional information about the risks and uncertainties of the
Corporation's business and material factors or assumptions on which
information contained in forward-looking statements is based is
provided in its disclosure materials, including its most recent
Management's Discussion and Analysis and Annual Information Form,
filed with the securities regulatory authorities in Canada and available at www.sedar.com.
SOURCE Power Corporation of Canada