Scotiabank is finally dealing with its lagging position in wealth management by taking a stake in DundeeWealth Inc. It is also acquiring Dundee Bank.

The bank has signed a definitive agreement to acquire 18% of DundeeWealth, with the right to acquire up to 20%. It will purchase 27.3 million newly issued common shares and non-voting shares at $12.76 apiece for a total price of $348 million.

Scotiabank also announced a shareholders agreement with Dundee Corp., giving it the right of first offer and a right to match any third-party offers if and when the company decides to sell its stake in DundeeWealth. The same rights are available to Dundee Corp. if the bank decides to sell its shares of DundeeWealth. The bank will nominate up to three members of DundeeWealth’s board of directors.

The agreement also includes the purchase of Dundee Bank of Canada by Scotiabank for $260 million. Scotiabank will provide banking solutions under a ‘white label’ agreement to DundeeWealth to support its distribution of products through the independent advisor channel.

Both transactions are subject to regulatory approval and are scheduled to close later this month.

“This is a strategic investment for us. DundeeWealth is one of Canada’s fastest-growing wealth management companies,” said Rick Waugh, Scotiabank president and CEO.

“It reflects our confidence in DundeeWealth’s proven investment and asset management expertise and deep experience with its independent advisor channel, and in the long-term potential of this investment. It is also an important step in our own continuing strong focus on wealth management.”

“The proposed transactions are a great fit with our strategic priorities,” Waugh added. “We will be expanding our wealth management earnings and we’ll have a partner that is well regarded in the asset and investment management field.”

Added David Goodman, president and CEO of DundeeWealth: “This is a win-win for both Dundee and Scotiabank. We have great confidence that Scotiabank will continue to support us in meeting the needs of independent financial advisors and their clients.”

“Selling Dundee Bank is a decision that allows us to reinforce DundeeWealth’s focus on our strength as one of Canada’s leading money managers,” added Goodman.

“We built this company using the money management model which provides for reasonable fees and low invested capital. We believe this transaction will allow Dundee Bank of Canada to realize its full potential without the need for substantial new investment capital and significant management time. In this arrangement Scotiabank will deliver the expertise on the manufacturing side of the business, while respecting our constant goal of supporting independent advisors.”

GMP Securities is exclusive financial advisor to DundeeWealth on the transaction, while Scotia Capital Inc. is acting for Scotiabank.