CI, Rockwater reach friendly deal

CI Financial has announced it will acquire Rockwater Capital Corp. for about $251 million. The Toronto-based wealth management company reported in a news release that the purchase would give CI “an impressive roster of over 180 first-rate investment advisors with assets under administration of $9.4 billion.”

Rockwater’s sale has been expected for weeks. According to Bruce Kagan, Blackmont Capital’s executive vice-president, several companies expressed interest in acquiring the independent financial services company, but it was CI who won out.

“The deal was in the best interest of both shareholders and stakeholders,” says Kagan. “There will be very little change to Blackmont. We will continue to run as a stand-alone investment dealer, while simultaneously being backed by CI’s tremendous financial resources.”

Dan Hallett, president of Dan Hallett and Associates, a Windsor-based investment counsel and independent research firm, said he was surprised Dundee, another company reportedly in the running, didn’t wind up on top.

“Rockwater and Dundee share similar lines of business,” he explains, adding that both companies have retail advisors, a money management arm and are active in investment banking.

But it’s CI’s and Rockwater’s differences that brought the two companies together, says William Holland, CI’s CEO. In order to compete with the banks, CI had to make a play for Rockwater and, more specifically, for Blackmont. “To compete with the banks, you have to be in the same line of business as they are,” he says. “So it’s important to have strong independent or non-bank financial planners and retail brokers.”

Although CI can now boost its distribution channels and add to its growing portfolio, the company made its first move for Rockwater only two weeks ago. “Investment bankers had suggested that there was a process going on and we should be interested in it,” says Holland. Prior to hearing about the bidding war, CI never really looked at Rockwater as a business to acquire. “We had never really done any real research,” he explains.

But, with CI’s propensity for acquisitions — it bought Assante in November 2003 and Synergy Asset Management in October of that year — it’s hardly surprising that the firm could make such a big move so quickly.

Kagan says that while all the proposed deals were attractive, CI’s was preferable, as it had no plans to cut jobs. Holland confirms that Rockwater employees will be staying put.

The deal is expected to close in about 45 days, says Kagan, but shareholders still have to vote on the proposed takeover. He doesn’t see any setbacks though, as all of Rockwater’s executives have endorsed the acquisition. “The board, as well as a special advisor to the board and all our executive team, has supported the deal, so we’re hoping our shareholders will follow.”

In the meantime, the market is supporting the announcement. Rockwater’s stock is up 59 cents to $7.59, while CI Financial’s stock increased 34 cents over yesterday’s close to $26.34.

Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@rci.rogers.com