(Add Scotiabank, analyst comments, CI response, background)
By Cameron French
TORONTO May 14 Bank of Nova Scotia
said on Wednesday it will explore options to divest itself of
some or all of its 37 percent stake in asset manager CI
Financial and redeploy the capital elsewhere.
The bank, which acquired the CI stake from insurer Sun Life
Financial Inc in late 2008, said in a statement it
would pursue any divestitures "in one, or a series of
Scotiabank , Canada's No. 3 bank, estimated the value of the
CI stake at C$3.8 billion ($3.5 billion), and offered no
assurances that any transaction will be completed. It said the
capital associated with the investment will be redeployed to
elsewhere in the bank.
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 ($89.2 billion) in assets under management as of April
CI, whose shares have risen 64 percent since Scotiabank
agreed to buy the stake October 2008, said in a statement it
"intends to review its capital structure and dividend policy to
ensure that it has the appropriate resources available to
respond to any monetization plan Scotiabank seeks to implement."
The question of whether Scotiabank would eventually sell its
investment in CI or buy the rest of the company has been a point
of discussion among analysts and investors, with many leaning
toward the divestment side in the wake of Scotiabank's
acquisition of wealth manager DundeeWealth in 2011.
"They don't need CI to be a major wealth manager in Canada.
They already have that between their old asset management
business and the one they got when they bought Dundee," said
Peter Routledge, an analyst at National Bank Financial.
"And what would be the premium to buy the whole thing out?
It would probably have been pretty high."
Scotiabank and CI have at times had a frosty relationship,
including a 2011 dispute over a shareholder rights plan that
restricted Scotiabank's ability to buy and sell CI shares.
"We've had strong momentum in our wealth management platform
and we've had a lot of success in our investment in Dundee ...
so we are confident that we have built a solid wealth management
platform," Scotiabank Chief Operating Officer Sabi Marwah said
in an interview.
Scotiabank shares ended down 1 Canadian cent at C$66.97 in
Toronto, while those of CI declined 17 Canadian cents to
C$36.13. The news was released after markets closed.
Barclays Capital analyst John Aiken said in a note that the
news could push CI shares higher because of speculation that
another financial institution could move in to take the company
Scotiabank is being advised by Goldman Sachs and also by its
own capital markets subsidiary, Scotia Capital.
($1 = 1.0906 Canadian Dollars)
(Reporting by Cameron French, additional reporting by Euan
Rocha; Editing by Lisa Shumaker, Diane Craft and Steve Orlofsky)