News

Canaccord Financial Inc. executes definitive agreement to acquire a 50% equity interest in BGF Equities to form Canaccord BGF

31 July 2011

TORONTO, July 31, 2011 – Canaccord Financial Inc. (“Canaccord”, TSX: CF, AIM: CF.) is pleased to announce that it has formed a partnership with BGF Equities (“BGF”) that will result in an expansion of its operations into Australia and Hong Kong.

The partnership entails the acquisition of a 50% equity interest in BGF Capital Group Pty Ltd (commonly known as BGF Equities), one of the fastest growing boutique equities advisory firms in Australia, with 40 employees and offices in Melbourne, Sydney and Hong Kong.  The transaction is expected to close in the calendar fourth quarter, at which point BGF Equities will be re-branded Canaccord BGF.  The agreement also provides Canaccord with a call option to acquire the remaining 50% equity interest of BGF in five years. 

This important expansion positions Canaccord well to leverage its expertise in the mining, energy and industrial sectors within Australia’s robust resource economy, and provides Canaccord with the capabilities to list companies on the Australian and Hong Kong stock exchanges. 

The new combined business will benefit from Canaccord’s global operations and distribution, and will provide an expanded offering of investment banking, sales and trading, research and wealth management services to corporate, institutional and private clients in the Asia-Pacific region. 

“We are pleased to welcome our new partners from BGF to Canaccord. The addition of our new offices in Sydney, Melbourne, and Hong Kong, allows us to better serve our clients with world class distribution capabilities in five geographies and on nine exchanges,” notes Paul Reynolds, President and CEO of Canaccord Financial Inc.  “BGF has built a strong, profitable business that represents an exceptional cultural, strategic and accretive fit with our business.”

“We’re pleased to be adding Canaccord’s global capabilities to our growing domestic business,” said Marcus Freeman, Managing Director of BGF Equities. “Our combined capabilities will make Canaccord BGF a significant competitor in the emerging company space and will benefit greatly from the global distribution capabilities of Canaccord,” he said.

On a pro-forma basis, the transaction is projected to be accretive to Canaccord’s earnings.

ACQUISITION OF EQUITY INTEREST IN BGF:

Canaccord has agreed to purchase a 50% interest in BGF, for aggregate consideration of approximately AUD$40 million, to be payable in cash and, subject to TSX approval, Canaccord common shares.  The number of Canaccord common shares to be issued as partial consideration for the purchase price (the “Consideration Shares”) will be calculated on the basis of the volume-weighted average trading price for the 20 consecutive trading day period ending on the third trading day before closing. However, the transaction is intended not to be dilutive; Canaccord intends to purchase a like number of shares under its outstanding normal course issuer bid and cancel them.

Completion of the equity investment is subject to a number of conditions, including the receipt of regulatory and stock exchange approvals.  Canaccord anticipates that the acquisition will close in the fourth quarter of calendar 2011 (during Canaccord’s third quarter of fiscal 2012). 

Canaccord has also been granted the option to purchase from the existing shareholders the remaining 50% equity interest in Canaccord BGF.  This option will be exercisable, at Canaccord’s sole option, for a three-month period commencing at the fifth anniversary of the initial investment at a price to be determined at that time by reference to Canaccord BGF profits. 

In connection with its investment, Canaccord will have the right to appoint three of the six directors of Canaccord BGF, and will have customary approval rights with respect to certain fundamental matters. 

The Consideration Shares will be held in escrow and will be released rateably over five years.

Keefe, Bruyette & Woods Inc. acted as financial advisor to Canaccord on the transaction.  Mallesons Stephen Jaques in Melbourne and Goodmans LLP in Toronto acted as legal advisor to Canaccord.

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