After a more than three-year courtship, National Bank Financial Group has finally landed Wellington West Holdings Inc.
The smallest of the Big Six banks acquired the Winnipeg-based financial services firm for $333 million.
The deal, which is expected to close in July, calls for the English Canada assets of National Bank to be merged with the wealth management assets of Wellington West, one of the leading independent financial services firms in Canada.
Those assets will total more than $67 million and will be run by Charlie Spiring, founder and CEO of Wellington West, out of his Winnipeg head office.
WWHI has four primary divisions – retail brokerage, financial planning, capital markets and asset management.
National Bank made its first investment in the Winnipeg-based firm three years ago when it bought a 12.5 per cent stake for $35.8 million. Since then, it had slowly built up its position to 18 per cent.
Luc Paiement, executive vice-president of wealth management at National Bank Financial Group and co-CEO of National Bank Financial, says it liked what it saw with Wellington West over the past three years.
“We said, ‘we’ll learn how the company works on the inside, get to know the people even more and we’ll respect Charlie. When he wants to sell, we’ll step up and be there,”’ he says.
“He called me late last year and said, ‘I’m more open to it than I was before.’”
Paiement says the addition of Wellington West is a “great strategic fit” for National Bank.
“We really believe in client relationships and high-touch services. There aren’t many ways of gaining access to a network like (Wellington West’s),” he says.
Spiring will assume the title of vice-chairman of National Bank Financial and be a member of Paiement’s executive committee for the brokerage side of the business.
“He’ll be a partner on a national basis. He’s going to help us grow the whole firm,” he says.
Dan Richards, CEO of Client-insights in Toronto, says the National Bank – Wellington West dance has been “one of the longest-running sagas” in Canada’s financial services industry.
“This deal shouldn’t be a surprise to anybody,” he says.
National Bank had made some substantial strides on its brokerage side by attracting some high quality advisors and building out its foundation by organic growth was unlikely to get it where it wanted to be in the desired time frame.
“The only way to accelerate that was with an acquisition,” he says.
Richards says Wellington West brokers will have more autonomy and independence than if the company had been bought by a larger bank.
The transaction value includes excess cash of $74 million. Excluding National Bank’s existing ownership, the amount payable to Wellington West shareholders is $273 million. Each shareholder, the vast majority of them are advisors, will have the option to receive cash or National Bank shares in exchange for their Wellington West holdings.
In addition, there is also a $35-million retention package, which could be worth about $200,000 per broker if they remain with the new entity for the next three to five years.
The Montreal-based bank has been very open about its aspirations to become a truly national player by expanding significantly outside of Quebec’s borders, especially in the wealth management business.
Spiring has long said he’s too young to retire – he’s 54 – so he wasn’t looking to sell the company and hit the golf course. His goal was to find a strategic partner that would write a large cheque to him and his partners while simultaneously handing him the reins.
Wellington West has 223 advisors in 50 branches across Canada servicing more than 68,000 investors. It has $10.6 billion in assets under administration and annual revenues approaching $200 million.
Spiring said the fact that National Bank was named the strongest bank in North America last month by Bloomberg Markets magazine and the third-strongest in the world, gave him great comfort in completing the sale.
“It’s like your kid is growing up and going to college. You don’t lose them. My baby is going to college now. I’m going to oversee it and run it. To have your baby under the umbrella of the strongest bank in North America, that’s a great place to have your kid grow up,” he says.
Spiring said there will not be any layoffs although there will be a handful of staffing reductions, all of them voluntary.
“We have not handed out any pink slips and we’re not going to,” he says.
Spiring takes great pride in saying Wellington West has helped create dozens of millionaires.
“I’m not sure of the exact number but it’s more than 50 and less than 100,” he says.
Spiring founded Wellington West in 1993 after he left Midland Walwyn. He started off with four advisors and a total of eight employees overseeing about $200 million in assets under administration.