Following an announced deal to take CI Financial Corp. private, one expert says Canadian investors largely did not see the value the firm brought to public markets.
The Toronto-based financial services firm announced Monday it signed a deal valued at $4.7 billion to be taken private by Mubadala Capital, the alternative asset management arm of a sovereign wealth fund from the United Arab Emirates named Mubadala Investment Co. Under the agreement, Mubadala Capital will pay $32 per share in cash for the company.
Julian Klymochko, the CEO and CIO at Accelerate Fintech, said in an interview with BNN Bloomberg Monday that the deal represents an attractive premium of 33 per cent above CI’s last closing price.
“So, an attractive deal for shareholders and a big splash by the Abu Dhabi Sovereign Wealth Fund Mubadala here coming into Canada with a very large high-profile transaction. But ultimately, we see this as a great deal,” he said.
“CI is a firm that the value is there, but Canadian investors really were just not recognizing it. So, they have the opportunity to exit here at an attractive premium and it appears that Mubadala wants to invest into CI to grow them.”
The deal is expected to close in the second quarter of 2025 and is subject to court and regulatory approvals as well as a shareholder vote and other closing conditions.
Klymochko said that since the deal involves an international investor, the Canadian government will likely “take a look at it.” However, he added that the government is expected to be friendly to the deal as it is mainly concerned with things like critical minerals.
According to Klymochko, there are some reasons why Canadian investors had been reluctant to purchase CI Financials’ stock, including the fact that it has a legacy mutual fund businesses “which is clearly a sunset industry.” However, he said that Kurt MacAlpine, who came in as the company’s CEO over the last few years, has expanded the businesses through aggressive acquisitions.
“So thus far, it appears that public market investors didn’t buy into it, but clearly private market investors and Mubadala here specifically is pretty keen it appears on that strategy. So ultimately, I think it gives merit to the strategy that public market investors were not recognizing,” he said.
“And at the end of the day, the stock is cheap. Still trading at, even despite the 33 per cent premium, single digit earnings multiple. So, they’re getting an attractive valuation here despite the premium.”
With files from The Canadian Press