TD, Canada’s second-largest bank by assets, made it past the second round of bidding for Richardsom GMP Ltd., according to people familiar with the sale process.Fred Lum/The Globe and Mail
Wealth management firm Richardson GMP Ltd. is on the auction block with at least one major Canadian bank, Toronto-Dominion Bank, among the bidders, according to people familiar with the sale process.
TD, Canada's second-largest bank by assets, made it past the second round of bidding, one of those people said. It isn't clear how much TD offered for the asset or whether the process will result in a definitive deal. The auction process, however, has attracted other interested parties including a second domestic bank, that person added.
Richardson GMP is one of the largest Canadian independent wealth management companies, with $27.2-billion in assets under administration (AUA) as of June 30. A sale of the company could fetch in excess of $500-million, according to Scotia Capital Inc. It would also mark the latest in a wave of transactions that has resulted in independent wealth-management companies being acquired by new owners.
Although Richardson GMP is small in comparison with the retail brokerage firms owned by the major banks, its focus on high-net-worth clients makes it a valuable asset. Fees from wealthier clients are more lucrative and the overhead is lower than it is at mass-market brokers with less affluent customers. Richardson GMP has the second-highest AUA per adviser in Canada, at $137-million, trailing only Royal Bank of Canada.
Other bidders in the auction include two American players: San Francisco-based bank Wells Fargo & Co. and Raymond James Financial Inc.
Raymond James has been in the financial advisory business in Canada for 15 years and recently made a deal to acquire MacDougall MacDougall & MacTier Inc., known as 3Macs. Once that acquisition is completed, Raymond James will have more than 400 advisers and portfolio managers in the country. Wells Fargo does not offer retail financial services in Canada, but does have a banking business that caters to mid-market and large companies out of offices in Vancouver, Calgary, Toronto and Montreal.
"We don't comment on rumour or speculation," a TD spokeswoman said in an email late Monday night.
A Wells Fargo spokesperson declined to comment, and GMP Capital also declined comment, citing a company policy to decline comment on market speculation.
TD is the only one of the Big Six Canadian banks not to have made a large acquisition in the full-service retail brokerage sector. Deals done in the past by Canadian banks include RBC acquiring Dominion Securities, Bank of Nova Scotia taking over McLeod Young Weir and Canadian Imperial Bank of Commerce buying Wood Gundy and the retail brokerage arm of Merrill Lynch.
In the late 1990s and early 2000s, TD instead focused on building its online brokerage business, making acquisitions that gave it a market-leading position in Canada and a 42-per-cent stake in TD Ameritrade Holding Corp. in the United States.
TD chief executive officer Bharat Masrani, who assumed the top spot in November, 2014, has been relatively quiet on the acquisition front. But during the bank's quarterly earnings call last month, he expressed a willingness to do tuck-in deals. With its sizable balance sheet and strong capital levels, TD would be able to digest an acquisition the size of Richardson GMP quite easily.
Earlier this year, Scotia Capital Inc. analyst Sumit Malhotra wrote an in-depth report exploring the possible outcomes of a sale process at Richardson GMP, estimating it could be sold for roughly $530-million, which would value it at about 2 per cent of assets.
Richardson GMP was created in 2009, when GMP Capital Inc. fused its wealth management arm with Winnipeg-based Richardson Partners Financial. GMP and Richardson Partners each own about 30 per cent, with the firm's retail advisers owning the remaining 40 per cent. This November, a so-called "liquidity mechanism" kicks in that allows any of the three major shareholder groups to officially put Richardson GMP in play. Some on Bay Street have speculated the asset could be sold before that.
Although Richardson GMP is not a public company, its consolidated financial results are disclosed by GMP Capital. In the six months ended June 30, the firm earned profit of $4.5-million on revenue of $130-million. Its assets under administration declined by 1.8 per cent from a year earlier.
This year has brought a number of takeovers in the wealth management sector. In addition to the Raymond James deal for 3Macs, Echelon Wealth Partners Inc. bought Dundee Goodman Private Wealth, the retail brokerage arm of Dundee Corp., for $13.5-million.