(Adds background, details on deal, share price)
By Euan Rocha
TORONTO May 28 (Reuters) - The Bank of Nova Scotia said on Wednesday it plans to sell the majority of its 37 percent stake in asset manager CI Financial via a secondary offering that could raise as much as C$2.62 billion ($2.4 billion).
The offering, one of the largest in Canadian history, will see Scotiabank sell at least 72 million CI shares for a set price at C$31.60 a share, raising roughly C$2.28 billion.
The syndicate of underwriters, led by Scotia Capital, RBC Capital Markets and GMP Securities LP also have an option to buy a further 10.8 million shares to cover over-allotments, meaning the offering could raise over C$2.6 billion for Scotiabank.
Earlier this month Scotiabank, CI's largest shareholder, said it planned to explore options to divest itself of some or all of its stake in CI and redeploy the capital.
Toronto-based CI is a diversified wealth management firm and one of Canada's largest investment fund companies. It operates under banners such as CI Investments, United Financial, Assante Wealth Management and Stonegate Private Counsel and had C$97.3 billion in assets under management as of April 30.
Scotiabank acquired its stake in CI from insurer Sun Life Financial Inc in late 2008 and the value of the stake has since risen considerably. However, since then Scotiabank and CI have had a frosty relationship and public spats at times, and many analysts speculated that Scotiabank would sell its stake in CI after it bought wealth manager DundeeWealth in 2011.
CI will not receive any proceeds from the offering that will result in Scotia booking a pre-tax gain of some C$380 million in the third quarter of fiscal 2014. If the over-allotment option is exercised that could lead to a gain of about C$440 million.
Scotia will retain an ownership stake of between 7.7 percent and 11 percent in CI once the deal closes in July. Scotia plans to use proceeds from the deal for general corporate purposes.
The deal will raise Scotia's common equity Tier 1 ratio by between 80 basis points and 110 basis points. The bank, Canada's third-largest, earlier this week reported a Tier 1 common equity ratio of 9.8, higher than rivals Toronto-Dominion and Royal Bank of Canada posted last week, and well over the regulatory target minimum of 8 percent that comes into effect in 2016.
The sale is being structured as a bought deal at a discount of about 6 percent to CI's closing price of C$33.65 on Wednesday on the Toronto Stock Exchange.
In a bought deal, underwriters commit to purchase the entire offering from a client and then resell it. If they resell shares below the offer price, their margins take a hit, and they could even lose money on the deal.
($1 = 1.0864 Canadian Dollars) (Reporting by Euan Rocha; Editing by Diane Craft)