Halifax-based Matrix Asset Management Inc. (TSX:MTA): has signed a letter of intent to merge with Marquest Asset Management Inc., headquartered in Toronto.

As part of the agreement, Marquest, which is privately held, will combine with Matrix through a share exchange. Marquest shareholders should receive 35% of Matrix treasury common shares from the company’s issued shares after the merger’s completion in exchange for all of Marquest’s shares.

The two companies say the merger offers several benefits for both firms including:

  • additional substantial equity and working capital for the merged business;
  • significant cost savings from rationalization and operating synergies;
  • larger scale, diversified asset management platform;
  • a stronger combined management team; and
  • greater growth opportunities.

The board of Matrix and its senior management team will have representation in both organizations. The transaction is expected to close on March 22, subject to shareholder, stock exchange and regulatory approvals.

The letter of intent also includes a break fee of $500,000 for each firm should either fail to perform its obligations to complete the merger or instead enters into a transaction with another company on or before the closing date.

Performance fees from Marquest managed or advised funds and gains on sales of securities acquired as a result of Marquest’s capital markets unit activities earned before the merger’s closing date will be grandfathered to existing Marquest shareholders.

However, any performance fees earned from Matrix investment funds before the transaction is finalized will not benefit current Marquest shareholders until the total equals the money that was grandfathered.

With offices across the country Matrix has approximately $1.1 billion in assets under management and is a diversified asset and wealth management company.

Marquest is a private Canadian investment management firm offering a variety of investment products. The company has $200 million in assets under management advisory or administration.