With the $309.5-million acquisition of Natcan Investment Management Inc., National Bank of Canada’s asset-management subsidiary, Montreal-based Fiera Sceptre Inc.’s assets under management will almost double to about $54 billion from $30 billion.
As part of the transaction, unveiled Feb. 27, National Bank will take a 35% ownership stake in Fiera; the two companies also have signed a binding AUM agreement with a minimum seven-year term.

Jean-Guy Desjardins will remain Fiera’s chairman, CEO, chief investment officer and controlling shareholder, but the shareholder participation of National Bank is reminiscent of the bank’s recent, gradual takeover of another firm.

“If you look at what happened with Wellington West [Capital Inc. of Winnipeg] last year,” says Gavin Graham, president of Graham Investment Strategy Ltd. in Toronto, “[in which National Bank] initially bought 20% stake and then ended up taking over all of it, that would be a logical conclusion. Having a minority stake in an asset manager is not something that tends to be sustainable, longer term. Either [the companies] agree to part company and the asset manager buys [the stake] back — or the major investor will take full ownership.”

Brenda Lum, managing director, Canadian financial services institutions, with Toronto-based DBRS Ltd., believes the Fiera/Natcan deal is indicative of what the banks are doing to outmuscle the competition: “All of the banks are continuing to look at growing their asset-management and wealth-management businesses. With the industry consolidating, I don’t think any of [them] are going to want to be left behind in the wealth-management sector.”

In 1972, Desjardins was the co-founder and principal shareholder of TAL Global Asset Management Inc. when Canadian Imperial Bank of Commerce moved in and bought shares in TAL. “Then, several years down the road,” Graham points out, “CIBC ended up taking things over, which was when Desjardins left to found Fiera. In other words, [Desjardins has] been through this process already.”  IE