National Post (Latest Edition)

Scotiabank buying spree doesn’t miss a beat



TORONTO • Bank of Nova

Scotia said Thursday that it will buy the Canadian Medical Associatio­n’s wealth management firm for nearly $2.6 billion.

Canada’s third-largest lender said it would fund a portion of the purchase of MD Financial Management, which was launched in 1969 and has more than $49 billion in assets under management and administra­tion, with a $1.5-billion public offering of 19.7 million common shares of Scotiabank at $76.15 apiece.

The deal is still subject to regulatory sign-offs and closing conditions and is expected to close in the fall.

Brian Porter, president and CEO at Scotiabank, said during a conference call Thursday that the lender’s proposed $2.585-billion cash purchase of MD Financial would give the bank the “largest private investment counsel business in Canada.”

“We believe that there are significan­t opportunit­ies to deepen MD client relationsh­ips through Scotiabank’s leading retail, small business and private banking products and services,” Porter said, adding that they expect the deal to be accretive on an earnings per share basis in year three, excluding integratio­n and amortizati­on costs.

Scotiabank’s purchase of MD Financial follows the bank’s approximat­ely $950-million acquisitio­n of independen­t investment firm Jarislowsk­y Fraser earlier this year, another move that was aimed at beefing up Scotia’s wealth management business.

The two purchases, Scotiabank predicted, adds an extra $78 billion in assets under management, pushing up the lender’s total Canadian banking assets under management to more than $230 billion.

Scotiabank and the CMA, which represents approximat­ely 85,000 doctors and doctors-in-training, said they would also enter into a 10-year partnershi­p when the deal closes, which would see the doctor’s group exclusivel­y promote Scotiabank to physicians as the financial product provider of choice.

Porter had noted just days earlier, during the bank’s second-quarter conference call, that the bank’s strong financial position put it in a position where it could grow via acquisitio­ns. Scotiabank’s common equity tier 1 ratio, a measure of the bank’s capital strength, stood at 12 per cent. The bank said Thursday that the MD Financial deal would draw down that ratio by around 30 basis points upon closing.

Porter said the bank’s CET 1 ratio is expected to be approximat­ely 10.7 per cent by the end of the fourth quarter of its fiscal 2018, but to rise to around 11 per cent by the end of Q1 2019, due to expected growth from internally generated capital and the planned sales of smaller assets.

“We are acquiring prized assets in core markets and business segments that will accelerate growth and enhance our presence and our capabiliti­es,” Porter said, noting its ongoing push into Latin America, as well.

MD Financial will be a standalone brand within Scotia Wealth Management, according to the bank, with its current employees and management team remaining in place. A notice on the MD Financial website promised a “seamless transition” for clients, of which, Scotiabank noted, there are around 110,000, including 45,000 physicians and 65,000 family members and employees.

“Scotiabank is firmly committed to preserving MD’s unique physician-specific approach to financial services and appreciate­s the in-depth knowledge of our highly skilled staff,” the notice said. “Additional­ly, over time, Scotiabank intends to grow our suite of services and expand the breadth and depth of the specialize­d financial advice offered by MD, enabling us to meet more of the needs of physicians and their families at all stages of their lives and careers.”

The terms of the deal would also see Scotiabank invest $115 million over the next decade “to support the advancemen­t of the medical profession and health care in Canada,” said James O’Sullivan, head of Canadian banking at Scotia.

The CMA said in a release that BMO Capital Markets served as financial advisor to the group, Stikeman Elliott LLP served as legal advisor, and PwC had provided an independen­t fairness opinion to the organizati­on’s board of directors.

Scotiabank said its global banking and markets division, as well as J.P. Morgan, acted as its financial advisor on the deal. Torys LLP was the bank’s legal advisor.

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