Business people are seen at the intersection of King and Bay Streets in Toronto on Oct. 15, 2014.Kevin Van Paassen/The Globe and Mail
Mackie Research Financial Corp. has announced it is buying Jennings Capital. Both firms are privately held so no financial terms were disclosed.
Calgary-based Jennings is an investment bank and wealth management firm, and was founded in 1993 by Rob Jennings. Mackie is a full-service investment firm and is one of the biggest privately held investment firms in Canada.
In a telephone interview, Mackie president Geoff Whitlam said there will be a small cash component for employees of Jennings who are not moving over to Mackie, but that the deal will be done mainly in equity. Shareholders of Jennings will receive shares in Mackie, on a mark to market basis, at book value.
Mr. Whitlam acknowledged that Jennings, like a lot of the independents that are heavily exposed to the small-cap sector, has been experiencing ''financial difficulties" over the past two to three years, particularly when it comes to raising money and doing financings. He admitted that while Mackie has also "suffered" in the small-cap space, its broader exposure to wealth management and private clients gives it extra diversification that Jennings doesn't have.
David McGorman, CEO of Jennings in a telephone interview admitted that the firm has had its "challenges" over the past number of years, specifically in the upstream resources sector.
Mr. Whitlam said a big reason that Mackie is buying Jennings is because of its expertise in domestic oil and gas investment banking. That is an area that Mackie is not currently exposed to and will "add significantly" to its business, he said.
Mr. McGorman said both parties had been in discussion about a deal for a while but that Jennings had started "serious discussions" with Mackie going into the summer.
He said that it can be a challenge for mergers to work, especially from a personnel point of view but this one "looked like a fit." Mackie and Jennings have a "similar mindset in the institutional side of the business," and it was clear that the deal would be "adding bench strength." he said.
Mr. Whitlam said that most of Jennings senior management team will stay on. Mr. McGorman will assume the role of vice chairman, head of western Canada investment banking. However there will be some layoffs as a result of the deal.
The acquisition is due to close on Dec. 1, subject to regulatory approval.