Aston Hill Financial Inc. and Front Street Capital 2004, both of Toronto, are linking up to create an independent money management firm with $3.1 billion in assets under management (AUM).
The expanded firm, which will continue under the Aston Hill name for now, will be lead by chief executive officer and industry veteran Joe Canavan.
Canavan most recently had been acting as a venture capitalist in the financial industry, and is a backer of robo-advisor Wealthsimple Inc. of Toronto. He has also acted as interim CEO of the Children’s Aid Foundation, where he remains vice chairman.
“The combination of Aston Hill and Front Street create an asset management platform with an attractive product mix and a talented team known for delivering exceptional client service,” Canavan said in a release Friday.
The deal, expected to close by yearend, will result in meaningful cost savings and a strengthened balance sheet for the new firm. Founded in 2001, Front Street has AUM of $879 million and offers a diverse range of investments including mutual funds, hedge funds and limited partnerships. Aston Hill is a publicly traded asset management firm with $2.2 billion in AUM including investment funds and institutional portfolios.
“We embarked on a business plan to create scale and innovation from the perspective that the industry must continue to meet the challenges of rapid change,” Nevin Markwart, president and CEO of Front Street said in an interview with Investment Executive. “The industry is ripe for consolidation, as a result of the dynamics of CRM2 and continuing discussions about embedded trailers. In a world where there are more discussions about fees there is a need for scale.”
Markwart says the transaction enhances the ability of the combined company to deliver investment performance and client service, and expects that new products will be introduced. The combined firm brings together best-in-class portfolio management expertise with each firm’s commitment to foster intimate relationships with investors and advisors, he says.
“We think that in this case, one plus one equals three or maybe even four,” he says. “And we were lucky enough to get Joe Canavan, a legendary leader in the industry, who will step in as CEO.”
Markwart, a 22-year industry veteran, has been president and CEO of Front Street only since July, when he replaced Gerald Ferguson, who had become the firm’s president and CEO just six months earlier. He was previously president and CEO of Canoe Financial LP of Calgary.
Current shareholders in Front Street will hold 46% of the new merged firm’ equity and Aston Hill shareholders will own 41%. Aston Hill debenture holders will be asked to exchange their debt securities for 33.7 million common shares or 13% of the equity, plus new debentures with amended terms and a longer maturity.
Canavan has been granted options to purchase 24 million common shares and will make a $500,000 investment in additional common shares upon the closing of the transaction, when he officially joins the company. At that time, interim CEO James Werry, currently president and CEO of Aston Hill, will step down. Aston Hill’s chief investment officer Ben Cheng is taking a leave of absence, effective immediately.
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