Mubadala Capital agrees C$12.1bn deal for Canadian asset manager CI Financial

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An arm of Abu Dhabi’s state investment fund is buying Canadian asset manager CI Financial in one of the largest direct investments into North America by energy-rich Middle Eastern buyers as they increase their investment plans in the region.

Mubadala Capital, the asset management subsidiary of the $302bn-in-assets state-backed investment fund, has agreed to pay C$32 a share for CI Financial, representing a 33 per cent premium to its Friday closing price.

The deal ascribes the Toronto-based investment manager, which has more than C$500bn in assets and a long history of managing money for wealthy US and Canadian investors, an equity value of C$4.7bn ($3.36bn), or an enterprise value of C$12.1bn when including its debt.

The takeover marks Mubadala Capital’s largest acquisition and comes as its chief executive Hani Barhoush told the Financial Times last month that he was preparing a deal push in North America, spotting an opportunity to plough cash into complex management buyouts, or to build stakes in private equity-owned businesses.

Mubadala, which recently raised a $3.1bn private equity fund, will rely on a large equity investment by its parent company to finance a takeover commitment that is larger than its entire fund. The structure is similar to Mubadala’s $3bn acquisition of credit manager Fortress Investment Group from Japanese conglomerate SoftBank, which was completed earlier this year and also relied on billions in support from its parent company.

In both deals, Mubadala is investing alongside existing management, who will be retained through the takeover and roll over large equity interests.

CI Financial’s management owns almost 16.9 per cent of the company. Chief executive Kurt MacAlpine will roll all of his shares while chair William Holland will roll up to 25 per cent of his stake.

Mubadala has also agreed to keep the CI Financial’s data in Canada. Mubadala made a similar concession as part of its takeover of Fortress, agreeing to keep its technology and data domiciled in the US to appease regulators such as the Committee on Foreign Investment in the United States as it scrutinised the deal.

CI Financial, which owns large wealth management operations in the US, has seen its share price stagnate in recent years as it accumulated heavy debts during an acquisition binge. Last year, it took a $1bn investment into its US wealth unit, called Corient, and said it would consider spinning off the operation. However, Mubadala plans to keep CI Financial’s operations together under private ownership, according to people familiar with its plans.

Mubadala’s acquisition comes as the Middle East-based fund has increased its pace of investments. In addition to Fortress, it has acquired high-end baby stroller brand Bugaboo, and Spanish IT consultancy Babel, over the past year. Barhoush told the FT last month that Mubadala Capital was also looking to buy large direct stakes in private equity-owned businesses where sellers were seeking liquidity.

“We are fully aligned with the strategy and direction of the firm and look forward to working with the CI management team to continue to build this outstanding business,” Barhoush said in a press release.