CI Financial Plans IPO for U.S. Wealth Management Business

Table of Contents The offices of CI FinancialAdvisor Newsletter Advisor Daily Canadian financial-services firm CI…

Canadian financial-services firm

CI Financial

has been snapping up U.S. investment advisory firms at a fast clip since entering the sector in 2020, making it one of the most aggressive acquirers in an industry marked by frenzied M&A activity.

Now, CI Financial is tipping its hand as to where its acquisition spree is leading: a U.S. IPO.

The Toronto-based company unveiled plans April 7 to sell up to 20% of its U.S. wealth management business via a U.S. initial public offering. CI Financial said it would file paperwork with the Securities and Exchange Commission this year.

The offices of CI Financial


CI Financial

CI Financial says it will remain the majority shareholder of the U.S. wealth management business and that it intends to use the net proceeds from the IPO to pay down debt.

CEO Kurt MacAlpine tells Barron’s Advisor that the company’s current stock price doesn’t reflect the underlying value of the business, which has changed dramatically over the past two years. He notes how numerous acquisitions have made U.S. wealth management a big business at the Canadian wealth and asset management company.

“You’d think with that transformation, your mix of asset and wealth management, you’d have a different share price,” he says.

The firm’s IPO plan will help address that disconnect and present a “clean” U.S. wealth management business for shareholders, he says. “There is a belief among us and investors that our U.S. wealth business will trade better than it will today.”

CI Financial currently has a price-to-earnings ratio of 9.5. U.S. wealth management firms such as

LPL Financial

and

Raymond James Financial

have ratios of 32 and 15, respectively, although they have different business models than CI Financial.

MacAlpine adds that CI Financial’s strategy to grow its wealth management operations remains unchanged, and that a U.S. IPO may accelerate its aspiration to be the leader in the high-net-worth and ultrahigh-net-worth client segment.

CI Financial, which is listed on the Toronto Stock Exchange under CIX and on the New York Stock Exchange under CIXX, also has asset management and wealth management businesses in Canada. The company oversaw approximately 370 billion Canadian dollars ($292 billion) in client assets as of Feb. 28, it says.

As CI Financial expanded its U.S. wealth management operations, its gross debt more than doubled, rising to about C$3.7 billion at the end of 2021 from C$1.6 billion in 2019, according to the firm’s fourth-quarter earnings report.

The company reported C$124 million in net income for the fourth quarter, up 18% year over year.

The company’s acquisitions of U.S. registered investment advisor firms have ballooned its wealth management business. CI Financial says that its U.S. wealth management assets will reach approximately $133 billion once all outstanding acquisitions are completed. MacAlpine said in a statement that CI FInancial’s U.S. wealth business now has sufficient scale to stand on its own feet, and that “a U.S.-listed subsidiary IPO is the best route to shareholder value creation.”

The IPO plans reflect a broader strategy shift laid out in 2019, when CI Financial said it intended to modernize its asset management business; grow its wealth management operations; and expand internationally.

Last year, CI Financial announced plans to open a U.S. headquarters in Miami. In an interview with Barron’s Advisor last year, MacAlpine says Miami was its top choice due to its popularity withCanadian snowbirds, and the growing number of financial-services firms calling the city home.

The company’s buying spree continues. In February, CI Financial said it would buy a California wealth management firm with $5 billion in assets.Acquisitions of registered investment advisor firms, or RIAs, have picked up in recent years thanks to an influx of buyers and private-equity firms, higher asset levels, and the trend of aging baby boomer financial advisors seeking to sell their firms and retire. Last year, the industry broke records for M&A deals, with more than 230 acquisitions, according to consulting firm DeVoe & Company. DeVoe does not track acquisitions of firms with less than $100 million in assets.

Write to Andrew Welsch at [email protected]