Phillips, Hager & North Investment Management Ltd., Canada’s best-known, low-cost fund manager, has been snapped up by Royal Bank of Canada.
The deal, where PH&N shareholders would receive 27 million RBC common shares, would put RBC in striking distance of becoming the country’s largest mutual fund manager, with $101 billion in assets under management, compared to IGM’s $104 billion. RBC and PH&N’s total combined assets under management, including the institutional side of the business, exceeds $160 billion.
Pending regulatory approval, PH&N will become part of the newly created RBC Wealth Management.
PH&N was attracted to RBC’s resources to leverage its strengths with institutional, private client and mutual fund clients.
“We’ve chosen to join forces with RBC because of the many benefits it affords PH&N clients, especially with respect to the kinds of investment opportunities they will need to be successful over the long term,” said John Montalbano, president of PH&N.
For RBC, the deal was about aligning competitive strengths.
“Together, our vision is to be a clear leader among Canadian-based asset management companies, and to continue to grow our global capabilities in investment management for institutional, retail and high net worth clients,” added George Lewis, group head of RBC Wealth Management and currently CEO of RBC Asset Management.
“We want to be the first choice for every client in Canada with asset management needs. With this announcement, we have an even stronger team, a larger playing field, and a well diversified, stable business mix, with strengths and talent across all asset classes, client segments and distribution channels of asset management.
Under the terms of the agreement, PH&N shareholders will receive 27 million RBC common shares, with a portion deferred until three years after closing.
Montalbano will become CEO of the combined organization comprising PH&N and RBC’s asset management business. Brenda Vince, president of RBC Asset Management, will lead the combined mutual fund and high-net-worth businesses. PH&N’s Hanif Mamdani will become head of alternative investments for both PH&N and RBC, while Damon Williams will remain as head of institutional management at PH&N. Dan Chornous, currently CIO of RBC Asset Management, will be the CIO of both PH&N and RBC Asset Management.
On a conference call to analysts, Lewis and Montalbano stressed that the investment management of PH&N and RBC will remain completely separate. There would be no integration of management teams, and no co-mingling of assets.
“All of the assets will under PH&N will be managed by PH&N,” said Montalbano. “This is not a transaction that is looking to squeeze out costs.”
Montalbano also alleviated any concerns that PH&N’s talent would jump ship. He says all of his firm’s senior people have signed five-year, non-compete clause contracts.
Filed by Deanne Gage, Advisor.ca. (02/21/08)