National Post

INDUSTRIAL ALLIANCE DOWNGRADED DESPITE PRAISE FOR HOLLISWEAL­TH DEAL

- Jonathan Ratner

Industrial Alliance Insurance and Financial Services Inc. was downgraded to hold from buy at Desjardins Capital Markets, despite analyst Doug Young’s praise for its recent agreement to purchase HollisWeal­th from Bank of Nova Scotia.

“The acquisitio­n is in line with management’s strategy and looks like a good deal for IAG,” Young told clients, hiking his price target on the stock to $59 from $56.

However, with IAG up 20 per cent in the past three months, the analyst’s total return outlook for the stock is only 6.2 per cent.

The all- cash transactio­n will see IAG pay approximat­ely 0.70 per cent of assets under advisement (AUA), which equates to $238 million.

Young noted that price tag is slightly below what would be expected for a dealer network, and less than comparable deals of the past.

HollisWeal­th has roughly 800 advisers and about $34 billion in AUA. Prior to the deal, IAG has more than $40 billion in AUA.

The deal is being financed with a $ 139 million equity bought deal at $55.65 per share.

Young anticipate­s it will be slightly dilutive to IAG’s earnings per share in 2017, but management expects modest accretion in 2018 and five cent per share accretion in 2019.

“The HollisWeal­th transactio­n looks like a good deal for IAG, and is in line with management’s strategy of growing in the wealth space,” the analyst said.

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