The proposed C$1.1bn (£700m) management buyout of Canaccord Genuity Group is in jeopardy after hitting a regulatory snag involving one of the company’s subsidiaries.
The Canadian financial services firm announced the Toronto Stock Exchange yesterday (8 May) that, due to a regulatory matter associated with one of its capital markets businesses, approval for the management offer would not be granted on “an expedited basis”.
Having conducted discussions with the regulator, Canaccord said regulatory approval was unlikely to be obtained in time to complete the offer prior to its expiry date of 13 June, and that it may not be received before the offer’s financing commitments expire on 9 August.
The takeover group, headed by CEO and president Daniel Daviau, includes chair David Kassie and all members of the firm’s global operating committee.
Collectively, the group are offering C$11.25 (£6.90) per share, which represented a 30.7% premium to the firm’s closing share price on 6 January.
On 8 May, after news of the regulatory issue broke, Canaccord’s shares fell by over 13% to C$9 (£5.30).
In response to the regulatory concerns, Canaccord said the subsidiary in question had made “significant enhancements to its compliance functions and significant investments in additional staff and technology”.
Canaccord said the snag was unrelated to the buyout, and it expects the matter to be resolved in the “ordinary course” without material impact on the subsidiary’s financial condition or results of operations.
However, the announcement added: “The management offerors have agreed that it will no longer be a condition of the management offer that the company not commence any process, proposal, plan or intention related to the sale of a material asset of the company.”
Canaccord’s capital markets division operates in North America, UK & Europe, Asia, Australia and the Middle East.