Power Corporation of Canada’s (CA:POW) is about to shake up its org chart. Its 100%-owned Power Financial subsidiary owns 62.2% of IGM Financial (CA:IGM), the Winnepeg-based financial services business whose brands include IG Wealth Management and Mackenzie Investments, and several strategic investments.
On April 4, IGM made a couple of moves that suggest Power Corp. believes IGM is the holding company’s growth vehicle of the future.
First, IGM announced it was selling its Investment Planning Counsel (IPC) independent wealth management business to the Canada Life Assurance Company for $575 million. Canada Life is owned by Great-West Life (CA:GWO), which is 66.6% owned by Power Financial. [All figures in Canadian dollars unless otherwise specified.]
For IGM, it gains a good return for the IPC unit while giving it some cash to reinvest in its business. And it just did that, simultaneously announcing that it was buying 20.5% of New York-based Rockefeller Capital Management for US$622 million. IGM will be the second-largest investor, behind only Viking Global Investors.
Iconic Brand
“This is a compelling strategic opportunity,” said James O’Sullivan, President and CEO, IGM Financial. “Rockefeller is a truly iconic brand with a proven growth model and a best-in-class executive team led by Gregory Fleming.”
“IGM’s equity interest in Rockefeller advances its strategy of expanding its presence in the high-net-worth and ultra-high-net-worth client segments, creating an entry to the U.S., the largest and deepest wealth market in the world,” Sullivan stated in the press release.
These are the latest moves by Power-controlled companies to remake the entire organization. It started in earnest in February 2020, when It acquired the shares of Power Financial it didn’t own, bringing its interest to 100% from 64% before the deal.
Board Seats
IGM gains two seats on Rockefeller’s board with the opportunity to increase its stake at some point in the future. As a result, it gains a foothold in the lucrative high-net-worth U.S. market and gains an ownership stake in a fast-growing wealth management business.
In 2018, Rockefeller managed US$18 billion in assets. Today, that’s more than US$100 billion, with 44 offices across the U.S.
As for selling IPC to its sister company, Canada Life, it will integrate the entire IPC management team and its 650 IPC financial advisors as part of its long-term plan to provide its clients with a “single end-to-end wealth platform.”
AUM Boost
The acquisition of IPC brings Canada Life’s assets under management (administration) to $85 billion while providing it with an investment dealer registered by the MFDA and IIROC regulatory bodies. As a result, it has become one of the country’s largest non-bank wealth providers.
IGM currently has $115 billion in assets under advisement, with more to come as it expands its U.S. footprint.
“Investors sold IPC for 13 times earnings before interest, taxes, depreciation, and amortization (EBITDA) and it has no growth. IPC hasn’t grown in years and yet they (IGM) just bought a 20% position in Rockefeller also with 13% EBITDA, and that’s been growing about 30% to 40% per year,” David Taylor, corporate director of PI Financial, told BNN Bloomberg in an April 4 interview.
In addition to the two transactions pointing to IGM’s role as a growth vehicle, it illustrates the ongoing usefulness of Power Corp.’s holding company structure.
IPC might not have done much for IGM’s growth, but it will undoubtedly help its sister company’s ambitions of scaling its wealth platform.
Happy Investors
This is a win/win solution for Power, IGMÂ and Great-West Life. Investors should be pleased about the news if they own any or all of these stocks.
Among institutional investors, POW stock, with 144 institutional owners and shareholder holding a total of 83,049,524 shares, is the most popular of the three, garnering a Fintel Fund Sentiment Score of 59.20. IGM stock, with 122 institutional owners holding a total of 6,068,288 shares, is the second-most owned of the trio, with a score of 42.13. GWO stock, with 143 institutional owners holding a total of 47,307,306 shares, scores 38.39.
Fintel’s Fund Sentiment Score finds the stocks that are being most bought by funds. It is the result of a sophisticated, multi-factor quantitative model that identifies companies with the highest levels of institutional accumulation. The scoring model uses a combination of the total increase in disclosed owners, the changes in portfolio allocations in those owners and other metrics. The number ranges from 0 to 100, with higher numbers indicating a higher level of accumulation to its peers, and 50 being the average.
This article originally appeared on Fintel
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