CI offers $254 million for Clarington

CI Financial has announced it will tender an offer for all of the outstanding shares of fund manufacturer Clarington. The $13 per share bid represents a hefty 62.5% premium over Friday’s close of $8.

The official offer will be mailed out to Clarington shareholders within the next two weeks, giving shareholders a choice of all-cash, all-stock — in the form of CI common shares — or a mix of the two. At $13 per share, the transaction would be worth about $254 million.

CI says it plans to reduce management fees on Clarington funds within 12 months of completing the deal, aligning the cost structure of the funds with its own products. CI currently manages about $53 billion in assets, between its mutual funds, segregated funds and closed end products.

“As a standalone company, Clarington didn’t make any sense,” said Stephen MacPhail, president and COO of CI Financial. “There are either big companies or niche players, but there’s not a lot of room otherwise. It’s pretty hard to be a three or four billion dollar mutual fund company and make money — you can’t.”

He said the hefty premium may look like a high price, but with CI’s economies of scale, the deal would still be accretive.

“Investors in the Clarington funds were paying unusually high fees relative to other products out there,” MacPhail said. “By moving their cost structures in line with ours, we think we’ll make those products that much better and help improve our brand with their constituents.”

According to IFIC’s September statistics, CI has $49.7 billion in mutual fund assets under management, while Clarington manages about $4.25 billion. The combination of the two would amount to $54 billion, trailing RBC Asset Management by less than $2 billion, but MacPhail points out that CI already has more long-term assets.

Clarington only went public in March of this year, with an IPO price of $10.50 reaching an all-time high of $12.90.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com