Canaccord deal may hinge on $34B unit

The board of Canaccord Genuity Group Inc. may prefer a deal involving its U.K. wealth management unit to a sale of the entire company, analysts say.

Canaccord, which is Canada’s largest nonbank brokerage, is exploring strategic options including a sale of all or part of its business, according to people familiar with the matter, Bloomberg reported Friday. The move comes after activist investor Eric Rosenfeld and former Canadian Imperial Bank of Commerce executive Gillian Denham joined its board of directors.

“A potential sale of Canaccord outright is low, as there may be a limited pool of potential buyers interested in Canaccord’s globally distributed and diverse assets,” Graham Ryding, an analyst at TD Securities in Toronto, said in a note to clients.

The board might be “hesitant to sell outright the U.K. wealth business, its most valuable asset, in our view,” Ryding said. But Canaccord could try to boost the scale of its U.K. wealth unit by combining it with another similar-sized firm, he added.

“U.K. wealth provides material earnings stability, and management still sees good growth and margin upside,” he wrote. The division had $34 billion (U.S.) in client assets as of June 30.

Canaccord shares have soared this year despite the COVID-19 pandemic, rising 63 per cent.

That rally comes after a slump that saw the stock decline 38 per cent in the five years ended Dec. 31, 2019.