Grow or sell: the logic behind LOGiQ’s deal

compliance costs and other fees that have to be paid to remain listed.

All of which explains why there are so few of them. Instead the vast bulk of such managers prefer to stay private, or in some cases operate with the support of a major shareholder.

But there is movement in thesectorasshownrecently when and agreed to a transaction via a share exchange. The deal is being done by way of a plan of arrangement and requires shareholder and court approval. If approved, Grenville shareholders will own 67 per cent of the combined entity; LOGiQ’s shareholders the rest.

When the announcement was made, the two parties said they believed “on a combined basis, the companies together will offer a more effective and viable platform for enhancing shareholder value.”

Joe Canavan, LOGiQ’s chief executive who is in the process of stepping down, said a prime reason for the deal is because “Grenville has a good loan book, a very good pipeline and is focused on industries that are going to be increased diversification and scale this transaction will provide” to Grenville noting the purchase price is attractive.

The deal, assuming all the approvals are received, will bring together managers with a different focus. LOGiQ, which completed the sale of its retail operations to Purpose Investments last December for $33 million, has about $3.4 billion of assets under management or advisement. The bulk of those assets ($2.9 billion) are for institutional clients that are part of LOGiQ’s institutional global advisory sales platform. (In essence LOGiQ represents certain international money managers who it lines up with Canadian clients. It gets a fee, akin to a royalty stream, for such business.)

LOGiQ’s other asset is a traditional investment management firm, Morrison Williams. A transaction involving that institutional and private client firm is expected to be announced shortly.

Grenville’s business is making investments in companies in the technology, industrial technology and services sectors. It generates revenues from royalty payments, buyouts from contracts and equity returns.

The deal brings together two companies, both of which are relatively new to the public markets and both of which got there via unconventional means.

For its part, LOGiQ has been around for less than 18 months. LOGiQ emerged when a group of backers acquired the publicly listed Aston Hill and merged that in with their other interests that also included Front Street Capital. For its part, Grenville was formed in early 2014 when it did a transaction with a capital pool company.

LOGiQ’s Canavan said the Grenville transaction came after it was rebuffed in its attempt to buy Sprott Asset Management. (That firm was acquired by the managers and renamed Ninepoint Partners.) But after Purpose acquired its retail unit, LOGiQ still had cash-flow problems because of the debt outstanding.

“We either had to get bigger and restructure the balance sheet or we had to sell. Being small with that much debt was overwhelming,” he said.