Canaccord Genuity Group Inc. is exploring ways to monetize its U.K. wealth management business, which could include a sale, in an attempt to generate value from a business segment the company considers to be undervalued, according to a person familiar with the situation.
Canada’s largest independent brokerage has been eyeing some sort of transaction related to its U.K. wealth management business for a number of months, the person said. The current discussions may not lead to a transaction, they said. The Globe and Mail is not identifying them as they were not authorized to speak on the issue.
News that Canaccord is exploring a significant deal was first reported by Bloomberg News on Friday, sending Canaccord’s stock price up 9.69 per cent by market close. Canaccord put out a statement on Friday afternoon, saying that “the company’s policy is that it does not comment on market rumours or speculation.”
“The company regularly explores opportunities to strengthen the value of its business. We are proud of the value that all of our businesses have created and are fully committed to their success,” the statement read.
Canaccord’s U.K. and Europe wealth management division began in 2012 with the acquisition of Collins Stewart Hawkpoint PLC and Eden Financial. Since then it has grown through a series of acquisitions, and is now Canaccord’s largest wealth management division, employing 209 investment professionals and fund managers with $43.5-billion in assets under management.
Revenue from the division was down 5.5 per cent, year over year, in the most recent quarter, but it remains one of Canaccord’s strongest performing business segments. U.K. and Europe wealth management generated $67.9-million in revenue in the three months ended June 30, making it Canaccord’s second biggest money maker after U.S. capital markets.
Other deals for U.K. wealth managers, such as Tilney Group’s £625-million ($1.1-billion) acquisition of Smith & Williamson announced last year, which valued the combined company at about £1.8-billion ($3.15-billion), suggest that if Canaccord’s U.K. wealth management division were to secure a comparable valuation, it could be worth $1-billion, according to another source familiar with the matter.
News of the discussions emerged a day after Canaccord reported a record quarterly revenue of $377.7-million, driven by strong trading and underwriting revenues. Deal flow was particularly strong in the mining sector, where a spike in the price of gold has led to a flurry of bought deals. On Thursday, Canaccord also appointed activist investor Eric Rosenfeld of New York-based Crescendo Partners LP to its board.
Mr. Rosenfeld has been involved in pushing changes at a number of companies, including Canadian construction giant Aecon Group Inc.
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