Scotiabank to Buy Jarislowsky Fraser, Add $32 Billion AssetsBy
Canadian bank agrees to pay $755 million for money manager
Lender will fund acquisition through issuance of new shares
Bank of Nova Scotia agreed to buy Canadian money manager Jarislowsky Fraser Ltd. for about C$950 million ($755 million), helping push the bank toward its goal of getting more earnings from wealth management.
The acquisition will add more than C$40 billion in assets under management on behalf of institutional investors and high net worth clients, making Scotiabank the country’s third-largest asset manager with C$166 billion under control, the Toronto-based lender said Monday in a statement. Scotiabank will fund the deal primarily through issuance of new shares and may pay an additional C$56 million in stock if growth targets are reached.
“Jarislowsky Fraser is an iconic Canadian brand with a disciplined investment process, a team-oriented approach with a proven high-caliber investment team, and a long history of delivering outstanding investment capabilities to institutional investors and high net worth families," Scotiabank Chief Executive Officer Brian Porter said in the statement.
The takeover was unanimously supported by all partners of Montreal-based Jarislowsky Fraser including its 92-year-old founder, Stephen A. Jarislowsky, a billionaire who’ll continue his association with the business that will retain his name and investment autonomy.
Jarislowsky has been one of the country’s most vocal advocates for better corporate governance and also fought to prevent takeovers of Canadian firms by foreign investors. Born in Berlin, he emigrated to the U.S. in 1941. He moved to Montreal to work for Alcan Aluminum as an engineer before starting the firm in 1955.
“The wealth-management space in Canada continues to consolidate and Scotia’s action to purchase Jarislowsky Fraser takes another important piece off the board,” Barclays Plc analyst John Aiken said in a note. “We view the transaction favorably as the high-net-worth clients of JF are exactly the clientele that the banks are pursuing."
Scotiabank shares rose 0.4 percent to C$76.92 at 11:43 a.m. in Toronto, paring this year’s decline to 5.2 percent.
The acquisition will help Scotiabank increase earnings from wealth management, which currently represent about 12 percent of total profit. Canadian banking head James O’Sullivan said at a Feb. 1 investor event that the firm wants wealth management to contribute 15 percent or more of total profit, and had a “keen interest" in acquisitions that could diversify its mix between retail and institutional.
The bank said it intends to offset the dilutive impact of issuing more shares by repurchasing a similar amount of stock in the 12 to 18 months after the deal is completed, which is expected to be in the fiscal third quarter.