CI Funds goes on buying spree, takes over Assante & Synergy

(August 22, 2003) CI Fund Management has moved into the upper echelon of Canada’s mutual fund industry, today acquiring the Canadian operations of Assante Corporation as well as Synergy Asset Management. The combined deals, worth nearly $1 billion, will make CI the number two fund firm in Canada.

“We will have about $38.5 billion in segregated and mutual funds assets, approximately the same as Investors Group,” says CI president William Holland.

“I am convinced that these deals will uniquely position us to be one of the clear winners in the hyper-competitive Canadian mutual fund business,” he added in a conference call this morning.

Under the Assante portion of the deal, shareholders will receive about 42.6 million CI shares, worth $571 million. In addition CI will pay $275 million in cash to Assante, making the deal worth a total of $846 million.

Holland says CI will continue to run Assante as an independent firm, maintaining its current lineup of products and services.

“Assante is a very viable business,” Holland said. “I wouldn’t expect that we would make an enormous amount of changes to something that is very successful. It’s the most productive financial planning outfit in the country.”

Assante, based in Winnipeg, has about $7 billion in assets and $17 billion under the administration of a 1,000-advisor network.

CI’s new distribution channel will be overseen by former Synergy president and founder Joe Canavan. “We wanted Joe to join our team,” Holland said. “I consider him to be our single best competitor out there.”

Holland says he’d like to see Assante become the “home of choice” for Canada’s independent financial planners. “We need to foster an environment where financial planners can thrive,” he said. “They’ve gone through very difficult times.”

Assante advisors will not be offered incentives to sell CI’s products, Holland said. “CI Funds will treat Assante as a valuable customer. There will be no preferential treatment offered to Assante that we would not offer to all other dealerships.”

Assante’s U.S. operations, including its sports and entertainment interests, will be spun-off to shareholders in a complex deal known as a plan of arrangement. “It’s the right deal at the right time,” said Assante president Martin Weinberg, who will join Assante U.S.

Assante has agreed not to solicit competing acquisitions and to pay a break fee of $22 million in certain circumstances.

The Synergy deal is also a stock and cash arrangement, worth approximately $116 million.

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Toronto-based Synergy has $1.5 billion in assets under management. Holland says although the company will no longer exist, the Synergy brand name will be kept. “They have four or five funds which have exceptional track records,” he said.

The Synergy takeover is expected to close in October, while the Assante transaction will likely wind up in November, pending shareholder and regulatory approvals, Holland said.

CI also announced a third takeover bid late yesterday afternoon, acquiring Skylon Capital, manager of the VentureLink family of labour-sponsored funds, for $32 million in cash and stock.

CI’s acquisition history dates back to 1999, when the Toronto fund company purchased BPI. In 2002, CI acquired Spectrum Investment and Clarica Diversico from Sun Life Financial. In exchange, Sun Life took a 30% share in CI, which was boosted to 34% last year.

Sun Life announced today it is purchasing an additional $271 million of CI shares to maintain its 34% stake.

Holland expects the consolidation trend to continue, noting that the tone in the fund industry has improved over the past six months. “I think that will play a role in seeing more transactions.”

“We’ve entered into a more mature phase of the business,” he added. “The winners are going to be large, well-branded, well-capitalized companies. They’re going to get market share and the smaller companies are going to lose market share.”

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What do you think of CI’s buying spree? How do you foresee it affecting Assante advisors? Share your thoughts in the Talvest Town Hall on Advisor.ca.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca

(08/22/03)