GMP Capital has struck a deal to buy New York-based fixed income boutique, Miller Tabak Roberts Securities, LLC.
The acquired firm specializes in institutional sales, secondary trading and research in high-yield and distressed debt, convertible bonds, international bonds, investment grade and asset-backed securities.
“MTR has built an impressive fixed income agency business that leverages a distribution platform with extensive buy-side relationships in North America and abroad,” said Harris Fricker, CEO and president of GMP.
“We believe that these capabilities combined with GMP’s financial strength, deep sell-side relationships and proven product origination capability will enable us to transform MTR’s traditional agency platform into a formidable primary business.”
GMP will pay US$33 million for all outstanding equity securities of MTR, subject to post-closing adjustments. Upon closing, key employees at MTR will receive common shares of GMP, worth about US$15 million in total. The sellers will also receive an “earn-out” amount to a maximum of US$11 million.
Completion of the transaction is subject to customary closing conditions, including regulatory approval. The transaction is expected to be completed before the end of GMP’s third quarter.
“Richardson GMP advisors will get direct market access to a product suite they did not heretofore have, and frankly, there won’t be any Canadian competitors with the penetration that these guys have on the wholesale side,” says Chris Tate, director of corporate development and strategic initiatives at GMP Capital.
He points out that MTR has “extraordinarily deep relationships” with institutional investors and wholesale traders in the U.S., which will provide clients with lower cost access to a wider range of fixed income securities.
“In the wake of the Richardson GMP merger, we’ve been building out our retail trading platform in fixed income. We’ll be able to use that bridge into a whole new product suite for advisors. These guys in the U.S. have access to a knowledge base about a whole set of products that no Canadian dealer has access to.”
Fixed income is becoming increasingly important as an asset class, as boomers head into retirement seeking reliable yield. But the yields on traditional government bonds and high grade debt—the traditional favourites—have been driver into the cellar over the past decade.
“In our view, it will continue to be a very low interest rate environment going forward. There’s been a massive increase in demand for non-investment grade fixed income products. There’s just a ton of money flowing into that space. That being said, Canada continues to be a very small market for non-investment grade fixed income, compared to the United States, where it’s a massive and extremely deep market.”