Scotiabank to divest majority of holdings in CI Financial in $2.27B deal

TORONTO – The Bank of Nova Scotia (TSX:BNS) is divesting more than two-thirds of its interest in CI Financial Inc.(TSX:CIX) through a bought deal agreement with a syndicate of underwriters worth at least $2.27 billion.

Under the agreement, announced jointly with CI, it will divest 72 million common shares of the company at $31.50 per share, reducing its current 37 per cent interest to about 11.4 per cent or 32.6 million shares.

That could drop to 7.7 per cent if an over-allotment option for an additional 10.8 million shares were to be exercised in full by the underwriters.

If approved, the first dividend which purchasers of the shares are anticipated to be eligible to receive is the one anticipated to be paid on July 15 to shareholders of record on June 30.

“CI has confirmed that there is no current intention to change its dividend policy in response to Scotiabank’s monetization plan,” the bank said.

Scotiabank said net proceeds of the offering will be used by Scotiabank for general corporate purposes and that it expects to record a pre-tax gain of approximately $380 million in the third quarter of fiscal 2014 (about $440 million if the over-allotment option is exercised in full).

“The strong performance of CI’s business has allowed Scotiabank to monetize a portion of its holdings while continuing to maintain a meaningful investment in CI,” it said. “Scotiabank will continue to regularly assess its remaining investment in CI.”

In announcing the decision to divest all or part of its CI holdings earlier this month, Scotiabank vice-chairman and chief operating officer Sabi Marwah noted that bank has had “a very good track record on deploying capital” and that opportunities for further deployments exit in each of its four business lines.

“We have a fairly active pipeline and given that active pipeline we believe that we’ll be able to profitably redeploy that capital,” Marwah said in a telephone interview at the time.

He said several factors had played into the decision, among them the “very strong momentum in our existing 100 per cent owned wealth management platform” — DundeeWealth Inc., which the bank acquired in early 2011 and renamed HollisWeath last year.

CI Financial Corp. (TSX:CIX) is an independent, Canadian-owned wealth management company offering a broad range of investment products and services, including a selection of investment funds.

Scotiabank, Canada’s most international bank, provides financial services in more than 55 countries with more than 86,000 employees and assets of $792 billion as of April 30.

On the Toronto Stocks Exchange, CI Financial shares closed down 13 cents at $33.65 on Wednesday, while Scotiabank stock edged up five cents to $68.82.