- Investment in U.S. business at a $6.7 billion equity value,
~3x CI’s current market cap
- $7.1 billion U.S. business enterprise value, 25.6x CI US
Q1’23 annualized Adjusted EBITDA
- Proceeds of $1.34 billion to be used to reduce net leverage
to 2.7x
- CI concurrently announces offer to tender three tranches of
bonds totaling $1 billion, in addition to fully paying down and
reducing the size of its Revolving Credit Facility by 25%
Financial amounts in Canadian dollars unless stated
otherwise.
CI Financial Corp. (“CI”) (TSX: CIX) announced today that it has
agreed to sell a 20% minority investment in its U.S. wealth
management business (“CI US”) to a diversified group of leading
institutional investors, including a wholly owned subsidiary of the
Abu Dhabi Investment Authority (ADIA), Bain Capital, Flexpoint
Ford, Ares Management funds, the State of Wisconsin, and others
(collectively, the “Investors”).
The approximately $1.34 billion (US$1.0 billion) investment is
being made at a $7.1 billion enterprise value for CI US,
representing 25.6x Q1’23 annualized Adjusted EBITDA of CI US1. The
deal enterprise value exceeds all of CI’s total enterprise value
and the deal equity value is ~3x CI’s current equity market
capitalization (as at May 10, 2023). At the closing of the
investment, CI will hold 80% of CI US with the Investors holding
the remaining 20%.
The proceeds from this investment together with the proceeds
from another recent asset sale total $1.5 billion, and will be used
to deleverage and reduce CI’s net leverage ratio2 from 4.0x to 2.7x
when accounting for the earnings reduction associated with the
minority investment.
“This investment from several leading global financial
institutions validates our differentiated U.S. wealth management
strategy and the considerable success we have achieved in just over
three years building and executing on the growth of the business,”
said Kurt MacAlpine, Chief Executive Officer of CI.
“We initiated an IPO process for our U.S. wealth management
business in late 2022 because we believed our share price did not
reflect the value we had created for our shareholders across both
our Canadian and U.S. businesses. Following the announcement of the
submission of our IPO registration statement with respect to the
U.S. business, we received significant inbound interest from
leading institutional investors.
“We capitalized on an opportunity to accomplish in the private
markets the objectives we sought in the IPO – value creation for
our shareholders, an infusion of capital to materially deleverage,
and the opportunity to build relationships with leading long-term
investors,” Mr. MacAlpine said. “The $1.34 billion investment in CI
US accomplishes all of these objectives, allowing us to continue to
execute on our vision for our U.S. wealth management business while
preserving flexibility to proceed with an IPO in the future.”
William Holland, Chairman of the CI Board of Directors, said:
“The CI Board is thrilled by the outcome of this transaction, which
creates substantial value for our shareholders and represents an
attractive alternative to an IPO of CI US. We have retained
majority ownership of CI US while partnering with world-class
investors and adding new directors at CI US.”
Upon closing of the transaction, expected in late May 2023, a
six-person board of directors will be formed to oversee CI US,
comprising five members nominated by CI and one member nominated by
the Investors.
RBC Capital Markets LLC served as exclusive financial advisor,
Skadden, Arps, Slate, Meagher & Flom LLP served as US legal
advisor, and Stikeman Elliott LLP served as Canadian legal advisor
to CI in this transaction.
About the Transaction
At the closing of the investment, CI will hold 80% of CI US with
the Investors holding the remaining 20% of CI US in the form of
convertible preferred equity. The holders of the preferred equity
are entitled to a number of votes equal to the number of shares of
CI US common equity into which the shares of preferred equity are
convertible. The holders of the preferred equity are only entitled
to dividends if declared by the board of directors of CI US. CI US
has no current intention of paying any such dividends on the
preferred equity. Each share of preferred equity is convertible at
the option of the holder into one share of CI US common equity,
subject to customary anti-dilution adjustments. The outstanding
shares of preferred equity automatically convert into CI US common
equity upon the closing of a qualified initial public offering of
CI US. In the event of an acquisition by a third party or
liquidation of CI US, and certain other events, each holder of
preferred equity is entitled to receive a liquidation preference.
The preferred equity contains customary minority consent, exit and
other rights for a security of this nature.
Additional information regarding the investment is available
under CI’s profile on SEDAR at www.sedar.com.
Note Regarding Forward-Looking Statements
This press release contains forward-looking statements
concerning anticipated future events, results, circumstances,
performance or expectations with respect to CI and its products and
services, including its business operations, strategy and financial
performance and condition, the closing of the transaction to sell a
minority investment in CI US, creating additional value at, and
executing for its vision for, CI US and the U.S. wealth management
business, and deleveraging at CI, including the completion of
tender offers for certain of CI’s bonds. Forward-looking statements
are typically identified by words such as “believe”, “expect”,
“foresee”, “forecast”, “anticipate”, “intend”, “estimate”, “goal”,
“plan” and “project” and similar references to future periods, or
conditional verbs such as “will”, “may”, “should”, “could” or
“would”. These statements are not historical facts but instead
represent management beliefs regarding future events, many of which
by their nature are inherently uncertain and beyond management’s
control. Although management believes that the expectations
reflected in such forward-looking statements are based on
reasonable assumptions, such statements involve risks and
uncertainties. The material factors and assumptions applied in
reaching the conclusions contained in these forward-looking
statements include that the conditions of closing of the
transaction to sell a minority investment in CI US are satisfied on
a timely basis or at all. The foregoing list is not exhaustive and
the reader is cautioned to consider these and other factors
carefully and not to place undue reliance on forward-looking
statements. Other than as specifically required by applicable law,
CI undertakes no obligation to update or alter any forward-looking
statement after the date on which it is made, whether to reflect
new information, future events or otherwise.
About CI Financial
CI Financial Corp. is a diversified global asset and wealth
management company operating primarily in Canada, the United States
and Australia. Founded in 1965, CI has developed world-class
portfolio management talent, extensive capabilities in all aspects
of wealth planning, and a comprehensive product suite. CI manages
and advises on approximately $391.1 billion (US$289.4 billion) in
client assets (as at March 31, 2023).
CI operates in three segments:
- Asset Management, which includes CI Global Asset Management,
which operates in Canada, and GSFM Pty Ltd., which operates in
Australia.
- Canadian Wealth Management, which includes the operations of CI
Assante Wealth Management, Aligned Capital Partners, CI Private
Wealth (Canada), Northwood Family Office, CI Direct Investing and
CI Investment Services.
- U.S. Wealth Management, which includes CI Private Wealth
(U.S.), an integrated wealth management firm providing
comprehensive solutions to ultra-high-net-worth and high-net-worth
clients across the United States.
CI is headquartered in Toronto and listed on the Toronto Stock
Exchange (TSX: CIX). To learn more, visit CI’s website or LinkedIn
page.
CI Global Asset Management is a registered business name of CI
Investments Inc., a wholly owned subsidiary of CI Financial
Corp.
1 Adjusted EBITDA of CI US is not a standardized earnings
measure prescribed by IFRS and might not be comparable to similar
financial measures disclosed by other issuers. For further
information, see “Non-IFRS Measures” on pages 8-13 of CI’s
management’s discussion and analysis for the three months ended
March 31, 2023 (“Q1 23 MD&A”), which are incorporated by
reference and available under CI’s profile on SEDAR at
www.sedar.com.
2 Net Leverage is calculated as net debt/Adjusted EBITDA
annualized, which is a not a standardized financial measure
prescribed by IFRS and might not be comparable to similar financial
measures disclosed by other issuers. Net Leverage and Adjusted
EBITDA annualized are non-IFRS financial measures. See “Non-IFRS
Financial Measures” on pages 8-13 of the Q1 23 MD&A, which are
incorporated by reference and available under CI’s profile on SEDAR
at www.sedar.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230510006148/en/
Investor Relations Jason Weyeneth, CFA Vice-President,
Investor Relations & Strategy 416-681-8779 jweyeneth@ci.com
Media Relations Canada Murray Oxby Vice-President,
Corporate Communications 416-681-3254 moxby@ci.com
United States Jimmy Moock Managing Partner, StreetCred
610-304-4570 jimmy@streetcredpr.com ci@streetcredpr.com
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