* Scotiabank paying C$2.3 bln for DundeeWealth
* Acquisition means it may sell CI stake -analyst
* CIBC seen as likely buyer if CI stake put on block
TORONTO, Jan 27 It is increasingly likely Bank
of Nova Scotia (BNS.TO) will sell its stake in asset manager CI
Financial (CIX.TO), and the most logical buyer is Canadian
Imperial Bank of Commerce [CM.TO], bank analyst Robert Sedran
said in a note.
Sedran, who works for CIBC's World Markets unit, said
Scotiabank's pending purchase of Canadian wealth manager and
investment firm DundeeWealth (DW.TO) means it may not want to
keep its 36 percent stake in CI, which is Canada's No. 3 wealth
Scotiabank bought the CI stake from insurer Sun Life
Financial (SLF.TO) in 2008, and many had assumed the bank would
take out the rest of CI.
But Sedran argues the DundeeWealth takeover -- Scotiabank
said in November it would buy the 82 percent of Dundee it did
not already own for C$2.3 billion ($2.32 billion) -- means the
bank will be busy integrating the new business and may no
longer feel it needs the added scale of CI.
As well, Scotiabank has demonstrated it is committed to
expanding its international presence, particularly in Latin
America, and adding to its CI stake would take away from its
ability to make foreign acquisitions, Sedran said.
"In our view, this makes a transformational acquisition
like CI unlikely over the next year, and indeed reduces the
need to do the deal at all," he said.
If Scotiabank does decide to sell off its CI stake, Sedran
points to CIBC as the most likely buyer as the bank is
domestically focused, has a strong balance sheet, and a vast
distribution network through its Canadian retail bank.
"In our view, a CI acquisition would be the most
strategically compelling for this bank," Sedran said.
CIBC is Canada's No. 5 bank, while Scotiabank is the
country's third-largest bank.
Shares of CI were up 24 Canadian cents at C$21.72 on
Thursday afternoon on the Toronto Stock Exchange, while CIBC
was up 18 Canadian cents at C$76.29, and Scotiabank was up 68
Canadian cents at C$56.83.
(Reporting by Cameron French; editing by Peter Galloway)