Scotiabank Seeks to Trim $3.5 Billion CI Financial Stake

Bank of Nova Scotia, Canada’s third-largest lender by assets, said it will scale back its C$3.8 billion ($3.5 billion) stake in money manager CI Financial Corp.

“Scotiabank has decided to pursue alternatives for monetization of some or all of its investment in CI Financial Corp.,” the Toronto-based lender said yesterday in a statement. “The capital associated with its investment in CI will be redeployed to other strategic priorities of the bank.”

Scotiabank first bought a CI stake in 2008 and currently holds 37 percent of the Toronto-based fund manager’s shares, according to the statement. As part of an expansion in wealth management, the lender also spent $442 million on the Canadian business of E*Trade Financial Corp. that year, and by 2010 agreed to buy shares it didn’t already own in fund manager DundeeWealth Inc.

“All we really wish to do is exercise our right to sell our shares like any other shareholder, and that’s essentially what it’s all about,” Sarabjit Marwah, Scotiabank’s chief operating officer, said in a telephone interview.

CI will review its capital structure and dividend policy to make sure it can adequately respond to the bank’s decision, Chairman Bill Holland said in a separate statement.

‘Extremely Profitable’

“Scotiabank is entitled to dispose of their shares as they see fit,” Holland said. “CI will work in the interests of all of our shareholders and management will remain focused on the continued success of our business.”

Scotiabank “made a lot of money buying CI,” Paul Holden, an analyst at Canadian Imperial Bank of Commerce, said in a telephone interview. CI “is extremely well run, extremely profitable, continues to grow, but banks typically don’t own a minority stake in a business for a long period of time.”

Scotiabank intends “to explore all options,” which may include selling some or all of its investment in a single or a series of transactions, according to the statement.

“We’ve been pleased with our investment in CI to date, but with our strong momentum in our wealth-management platform as well as the continued success of our investment in Dundee, we’re really quite confident that our wealth-management platform is very solid,” Marwah said.

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