A proxy circular filed by Canadian First Financial Group outlines the firm’s proposed sale of its securities business.

On May 29, CFFG agreed to sell Burgeonvest Securities Ltd to Burgeonvest Financial Corp. for $325,000, while retaining BSL’s shares in the Toronto Stock Exchange.

It is proposed that the BSL business be transferred to a newly incorporated subsidiary of BSL, with BFC purchasing all of the outstanding shares of that subsidiary. BSL would remain a subsidiary of CFFG, its assets comprised of the consideration received for the BSL business and the TSE shares. The deal is scheduled to close June 29.

Back on Sept. 29, 2000, CFFG announced its intention to sell BSL to BFC for $1.7 million, with CFFG repurchasing 1,750,000 of its common shares from BFC and receiving a note in the amount of $1 million, which was to be payable in ten equal annual installments. Closing was scheduled for October 31, 2000. But on Dec. 4, 2000, CFFG indicated that due to the time required to satisfy all required regulatory approvals, the closing of the sale would likely be delayed until early 2001.

After the annual and special meeting of the corporation on March 6, the board decided to review the potential disposition of BSL to BFC, and engaged KPMG LLP to perform a valuation of BSL based upon a previous proposed transaction structure. KPMG delivered its valuation on April 18.

In valuing BSL, KPMG examined two aspects of BSL: the core operating business, consisting of retail brokerage, investment management and corporate finance; and BSL’s shares in Toronto Stock Exchange Inc., which were issued to BSL upon the demutalization of the TSE in June 1999.

KPMG’s opinion valued BSL’s business at between $256,000 and $341,000; $324,000 for redundant assets remaining in BSL after closing; and between $3.3 million and $3.9 million for the TSE shares. With the TSE contemplating an initial public offering as soon as the market allows it, CFFG has decided to hang on to these shares in anticipation of an IPO.

BSL was acquired in December 1998 to provide securities trading services to its Ross Dixon Financial Services franchises. But the current strategy being advocated by BSL’s management is one focused upon the further development of its corporate finance and investment management businesses.

BSL’s management has indicated to CFFG’s board that the expansion of these business lines will require significant additional amounts of working and regulatory capital for BSL. But CFFG wants to target its investments to support and develop the businesses of its financial planning subsidiaries. “As a result, the board believes it is in the best interest of the corporation to sell the BSL business to BFC, whose shareholders include members of BSL’s management.”

It is not anticipated that the proposed transaction will have a significant impact on CFFG’s ongoing financial results. The securities business only accounted for about 12% of revenue in CFFG’s most recent fiscal year. BSL has agreed to continue to provide securities trading services to Ross Dixon and Hewmac offices after the proposed sale.