Canaccord Genuity Executives Make Take Private Bid

The leaders at Canada’s largest independent investment would prefer not to be disturbed in public.

On Monday, a cadre of c-suite players at Canaccord Genuity announced a take-private bid worth roughly $843 million, betting they’d have better luck with a growth-focused investment banking business away from the prying eyes of a volatile public market. In a tumultuous global economy, we’d call that a reasonable expectation of privacy.

Private I (Banking)

It should be no surprise that a firm focused on growth companies would struggle in an era of rapid inflation and rising interest rates. Canaccord, which has more than $96 billion in assets under management and specializes in IPOs, is no exception. The firm’s share price has tumbled roughly 43% in the past 12 months as net income plunged around 50% year-over-year. In June, Canaccord said its largest shareholder expressed concerns that the firm was undervalued by public markets and said it would support a take-private deal. Now, Canaccord’s top managers are heeding that call and taking advantage of the sinking stock to make a timely take-private bid, hoping to turn crisis into opportunity, or at least less of a crisis.

CEO Daniel Daviau, Chairman David Kassie as well as around a dozen other senior executives — who hold a collective ownership stake of 21% of Canaccord’s shares — are now seeking to take the company off the Toronto Stock Exchange. To do so, they’re willing to pay up, though it’s uncertain their offer is enough to convince every stakeholder:

• The group’s bid, announced at C$11.25 per share, marks a premium of over 30% on the close price Friday and over a 40% premium to the volume-weighted average of the past twenty days but it’s also just a minor increase from Canaccord’s 2014 IPO price of C$10.25.
• However, an independent committee of three board members has yet to recommend the offer to shareholders based on a preliminary analysis from the Royal Bank of Canada, which the committee hired as an independent financial advisor.

In Large Part: The bidding group said Monday that Canaccord’s largest outside shareholder, which it did not name, supports the take-private offer, and also announced that the New York-based HPS Investment Partners has agreed to provide over $615 million in debt financing to complete the deal. Who’s the mystery shareholder? Lo and behold, Canada’s top newspaper, The Globe and Mail revealed on Monday that HPS is Canaccord’s largest outside shareholder. What can we say, investment bankers are gonna think exactly like… investment bankers.