The logo for Canaccord Genuity is shown in Toronto on Wednesday, March 8, 2023.Staff/The Canadian Press
Executives at Canaccord Genuity Group Inc. CF-T have officially scrapped their all-cash $1.1-billion management buyout offer, ending a fight that turned into a hostile takeover from within and resulted in the resignations of multiple board directors.
The investment dealer’s management team announced early Wednesday that they have let their bid to take the company private expire – an outcome they had previously warned could happen after disclosing a vague “ongoing regulatory matter” in one of Canaccord Genuity’s foreign subsidiaries. The team also said they have agreed to a two-year standstill with the board.
The company’s shares closed Wednesday at $8 a piece, dropping to roughly where they were trading when the takeover saga began five months ago.
In January, the company’s leaders launched their management buyout, backed by chief executive officer Dan Daviau and board chair David Kassie, and set the price at $11.25 per share. Canaccord Genuity’s shares were trading at $8.61 at the time.
Despite investing in its wealth management division over the past decade, particularly in Britain, Canaccord Genuity is still seen as a traditional investment bank that profits handsomely during bull markets when deal volumes soar, and that suffers during downturns when advisory fees disappear. The previous year had been challenging for investment banks, and Canaccord Genuity’s shares were hit particularly hard, falling 48 per cent from their 2021 peak.
Management seized on the depressed valuation, but their buyout offer turned contentious within hours. On the same January morning that Canaccord Genuity’s leaders said they wanted to take the company private, a committee of independent board directors said they had already hired Royal Bank of Canada as an adviser and that they were not prepared to accept an offer of $11.25 a share, based on RBC’s preliminary analysis.
A few weeks later, the committee formally rejected the takeover offer, saying Canaccord Genuity was worth $12.75 and $15.75 per share. The midpoint of that range, $14.25 per share, implied a valuation of $1.42-billion – almost $300-million more than the management group was offering.
The decision infuriated some shareholders. Skky Capital Corp. Ltd., a Bermuda-based fund manager controlled by Canadian financier Gordon Flatt that owns an 8.8-per-cent stake in Canaccord Genuity, said it had “lost confidence” in the special committee. In response, all four members of the special committee – Jill Denham, Dipesh Shah, Charles Bralver and Sally Tennant – quit, saying in a statement that their breakdown with management and others through the course of the bid had become “irreparable.”
Ms. Denham, the special committee’s lead director, had been a long-time colleague of board chair Mr. Kassie, as the two worked closely together going back to their run at CIBC World Markets in the early 2000s.
With the special committee in tatters, Canaccord Genuity appointed new directors to review the management buyout offer. Initially, it appeared that management had a better chance of getting their deal across the finish line, but in early May, they disclosed the “ongoing regulatory matter” involving one of its foreign subsidiaries, without going into specifics.
Since then, Canaccord Genuity’s shares have traded in the $9 to $10 range, partly because of the uncertainly around the regulatory issue, and partly because investment banks across Bay Street continue to struggle. With investment banks hurting, it was unclear if management were still as keen on the takeover at $11.25 per share.
The management team officially let their offer expire late Tuesday, and the company will now carry on as if it is business as usual – albeit with some different leaders and board directors.
Also on Tuesday, Canaccord Genuity announced that Canadian capital markets head Pat Burke, a deputy to CEO Dan Daviau, was stepping down, according to an internal memo obtained by The Globe. Stuart Raftus, previously the head of the wealth management division, is now CEO of the entire Canadian arm.
The board members who resigned have also been replaced by Terry Lyons, Amy Freedman and Rod Phillips. Ms. Freedman and Mr. Phillips will now serve as independent directors to both the audit and risk committee and the corporate governance and compensation committee.