ADIA, Bain, and Others Purchases a 20 Percent Stake in CI Financial’s US RIA Aggregator
Posted on 05/11/2023
Toronto-based CI Financial Corporation (“CI”) (TSX: CIX) agreed to sell a 20% minority investment in its U.S. wealth management business (CI US) to a diversified group of institutional investors, including a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA), Bain Capital, Flexpoint Ford, Ares Management funds, the State of Wisconsin Investment Board, and others.
The approximately C$1.34 billion (US$ 1.0 billion) investment is being made at a C$7.1 billion enterprise value for CI US, representing 25.6x Q1’2023 annualized Adjusted EBITDA of CI US. At the closing of the investment, CI Financial will hold 80% of CI US with the Investors holding the remaining 20%.
The proceeds from this investment together with the proceeds from another recent asset sale total US$ 1.5 billion, and will be used to deleverage and reduce CI Financial’s net leverage ratio.
Kurt MacAlpine is the Chief Executive Officer of Ci Financial. MacAlpine was a former executive at Wisdomtree Investments. In November 2019, Chief Executive Officer Kurt MacAlpine introduced a new strategy for the CI Financial based on three strategic priorities: modernize CI’s asset management business, expand CI’s wealth management platform, and globalize the company. In 2020, the company entered the RIA market, and has since completed the acquisition of interests in over two dozen established RIA firms across the U.S.
In late 2022, CI Financial initiated an IPO process for its U.S. wealth management business because they believed their share price did not reflect the value they had created for their shareholders across both their Canadian and U.S. businesses. Following the announcement of the submission of their IPO registration statement with respect to the U.S. business, CI Financial claimed to received significant inbound interest from institutional investors.
Upon closing of the transaction, expected in late May 2023, a six-person board of directors will be formed to oversee CI US, comprising five members nominated by CI and one member nominated by the investors.
Advisors
RBC Capital Markets LLC served as exclusive financial advisor, Skadden, Arps, Slate, Meagher & Flom LLP served as US legal advisor, and Stikeman Elliott LLP served as Canadian legal advisor to CI in this transaction.
About the Transaction
At the closing of the investment, CI will hold 80% of CI US with the Investors holding the remaining 20% of CI US in the form of convertible preferred equity. The holders of the preferred equity are entitled to a number of votes equal to the number of shares of CI US common equity into which the shares of preferred equity are convertible. The holders of the preferred equity are only entitled to dividends if declared by the board of directors of CI US. CI US has no current intention of paying any such dividends on the preferred equity. Each share of preferred equity is convertible at the option of the holder into one share of CI US common equity, subject to customary anti-dilution adjustments. The outstanding shares of preferred equity automatically convert into CI US common equity upon the closing of a qualified initial public offering of CI US. In the event of an acquisition by a third party or liquidation of CI US, and certain other events, each holder of preferred equity is entitled to receive a liquidation preference. The preferred equity contains customary minority consent, exit and other rights for a security of this nature.
On May 11, 2023, CI Financial disclosed it is offering to purchase for cash, in three separate offers a targeted aggregate principal amount of its Debentures maturing in 2024, 2025, and 2027 of up to $1 billion of the outstanding debt securities.