Great-West Lifeco Inc. (GWL) is selling its Canadian subsidiary GLC Asset Management Group Ltd. to Mackenzie Financial Corp., a subsidiary of IGM Financial Inc., for $175 million in cash.
As part of the deal, GWL subsidiary The Canada Life Assurance Company will acquire fund management contracts relating to the private label Quadrus Group of Funds and other Canada Life branded investment funds from Mackenzie for $30 million in cash.
That will result in Winnipeg-based GWL receiving net cash of $145 million if the deal receives regulatory approval and closes as expected in the fourth quarter.
Canada Life said the fund management company it’s establishing, Canada Life Investment Management Ltd., which is expected to commence operations in the fourth quarter, will assume fund management responsibilities for the investment funds in 2021.
In a separate release, Mackenzie said the addition of $36 billion in assets under management through the deal increases its total to $172 billion, making it one of Canada’s largest asset managers.
Paul Mahon, CEO of Great-West Lifeco, said the transaction supports Canada Life’s strategy to strengthen and grow its Canadian wealth management business.
“It leverages an already established and strong working relationship between our companies,” he said in a statement.
“By working together, we will have access to Mackenzie’s at-scale investment management capability, while retaining control of our overall Canadian wealth management strategy, including our product shelf and solutions for our customers.”
In an emailed statement, Barry McInerney, president and CEO of Mackenzie Investments, said the transaction made sense “because it’s consistent with Mackenzie’s objective of solidifying our position as a leading Canadian asset management firm and increases our access to growing markets such as the group retirement space.”
Further, being part of the same corporate family will be helpful, he said. GWL and Mackenzie’s parent company, IGM, are both subsidiaries of Power Corp.
“There is an existing familiarity and shared culture between our two organizations that have and will make this transaction a success for our people and clients,” McInerney said.
Power Corp.’s division Power Financial owns 66.9% of GWL and 62.1% of IGM Financial, and the two subsidiaries own small interests in each other.
Great-West Lifeco beats earnings expectations
After announcing the sale, GWL released its earnings for the second quarter, which showed a roughly 88% increase over a year ago.
Net earnings attributable to common shareholders were $863 million, or $0.93 per common share (EPS), for the second quarter of 2020 compared to $459 million, or $0.49 per common share, for the same quarter last year.
The increase was mostly due to favourable contributions from insurance contract liability basis changes and equity market recoveries in-quarter, the report to shareholders said.
Base earnings were up 13% in the quarter annualized, reaching $706 million or $0.76 per common share, compared to $627 million or $0.67 per common share a year ago.
The increase in base earnings was primarily driven by business growth in the capital and risk solutions segment and strong investment experience, the report to shareholders said.
GWL beat analyst expectations, which predicted net earnings of $0.72 per share and base earnings of $0.60 per share.
In a release, Mahon said the “strong” quarterly results reflected a “resilient business model, robust balance sheet, effective risk framework and high-quality investment portfolio.”
Further, “we’ve moved key strategic initiatives forward, including digital technology investments, and mergers and acquisitions such as the sale of GLC Asset Management and addition of Personal Capital,” he said. “[GWL] remains well-positioned to drive business growth through differentiation and capital deployment.”