Dundee shares surge after restructuring real estate unit

Fri Dec 14, 2012 12:33pm EST

* Shares climb $3.19 to C$30 on realty spinoff

* CEO said market was undervaluing shares

* Management to remain in place

TORONTO, Dec 14 (Reuters) - Shares of Dundee Corp soared as much as 14 percent on Friday after the asset management company said it would distribute half of its stake in its real estate unit to shareholders, unlocking value in frustration over what it believed was a low share price.

Under the restructuring plan, the Toronto-based company will retain a 20 percent ownership interest in Dundee Realty, while the unit's president and chief executive, Michael Cooper, will hold the remaining 30 percent stake.

"It is a good deal for shareholders," said Barry Schwartz, portfolio manager at Baskin Financial Services in Toronto, who said he owns the stock personally but does not hold it for clients.

"For long-term shareholders, it's been a long time coming. They've sold off their mutual fund arm and their spinoff company, the REIT, the industrial and now the international," he added. "They're building a conglomerate, and really following the model used by Brookfield Asset Management to unlock the value and then get management fees up to the top parent corporation."

Shares of Dundee rose C$3.19 to C$30.00 in midday trade on the Toronto Stock Exchange, after hitting a new 52-week high of C$30.55 and flying nearly 42 percent above the 2012 low of $C21.16 hit on Aug. 15.

Dundee Corp has a 70 percent stake in Dundee Realty.

Dundee Chief Executive Ned Goodman will become board chairman of the new company, while Cooper will be president and CEO, the company said in a statement.

"The board believes that the current market capitalization of the corporation understates the intrinsic value of its underlying assets," Goodman said in a statement.

"With two separate publicly traded entities, the investment community will be better able to assess the value of each of these businesses."

The new entity would have two classes of common shares along with preferred shares. The plan is subject to regulatory, court and shareholder approvals, with a shareholder vote expected in the first quarter of 2013, the company said.

Dundee Corp has some C$65 billion ($65.99 billion) in assets under management and administration. Its Canadian wealth management activities are conducted through its unit DundeeWealth Inc in which it has a 62 percent controlling stake.

($1 = 0.99 Canadian dollars) (Reporting by Andrea Hopkins; Editing by Jan Paschal)

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