Scotiabank snaps up 37% CI stake
Scotiabank will pay $2.3 billion for Sun Life Financial Inc.'s 37 per cent stake in CI Financial Income Fund, the two companies announced Monday.
Scotiabank said the deal gives the chartered bank a leg up in the relatively lucrative business of managing other people's money.
"We have seen solid growth in our wealth management products and services. Through this agreement we gain a significant stake in one of Canada's wealth management market leaders with a long track record of superior performance," said Rick Waugh, Scotiabank's president and chief executive officer.
Scotiabank president and CEO Rick Waugh said the bank wants more, not less, wealth management work.(Canadian Press)Under the terms of the sale, Sun Life will receive almost three times the $860 million that the insurer paid for its portion of CI in May, 2002.
CI is the No. 3 mutual fund company in Canada and had sales of $152 million in September, according to Scotiabank.
Interestingly, Monday's agreement comes less than a month after talks broke down between CI and Scotiabank about the sale of Scotiabank's mutual fund business.
Those discussions about CI grabbing Scotiabank's fund business, with an estimated $22 billion in assets under management, fell apart over the bank's unwillingness to exit the mutual business entirely.
This time around, Sun Life decided to cash out its five-year-old stake in CI and use the money to hunt for bargains among distressed financial service companies in the United States and Europe.
"Sun Life is well positioned to take advantage of unprecedented opportunities existing within the global financial services sector today. Unlocking CI’s value now provides Sun Life with enhanced firepower to aggressively pursue our growth objectives," said Sun Life CEO Donald Stewart.
A number of U.S. banks and brokerage houses have seen their corporate value plummet as investors continue to punish firms with high-levels of exposure in the asset-backed commercial paper market.
So far, Sun Life has said it holds more than $1 billion in the debt of three U.S. financial institutions — Washington Mutual, American International Group and Lehman Brothers — that have either been taken over or have declared bankruptcy in the Wall Street meltdown.
At the end of the June quarter, however, Sun Life still held $5.4 billion in cash and near-cash equivalents. The additional money from the CI sale means Sun Life's war chest stands at $7.7 billion.
0 comments:
Post a Comment