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CI Financial looks to increase scale, bolster retail team with Sentry deal

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CI Financial looks to increase scale, bolster retail team with Sentry deal

A congested space for active asset managers in the Canadian marketplace has limited the number of large M&A transactions across the industry, CI Financial Corp. CEO Peter Anderson said.

Consequently, asset managers in Canada are looking to increase scale to gain a competitive advantage over peers, according to Anderson. Both factors were key drivers in CI Financial's proposed acquisition of Sentry Investments, Anderson indicated while addressing analysts on an Aug. 10 conference call. The company agreed to acquire Sentry Investments Corp. and Sentry Investments Inc. for a total of C$780 million in cash and stock, with C$230 million to be paid in cash and another C$550 million in CI Financial common shares.

The addition of Sentry Investments could increase CI Financial's access to distribution, bolster its Canadian business and create a more diverse line of portfolio managers, meeting all the requirements the company takes into account when considering an acquisition, Anderson added. Critically, Anderson said the acquisition of Sentry Investments will allow CI Financial to significantly increase its team of retail advisers, a key focus for the company in 2017.

The acquisition could provide CI Financial with the opportunity to use its increased scale to create synergies across comparable businesses, CI Financial CFO Douglas Jamieson said. CI Financial intends to complete the synergies by 2019, half of which it expects to incorporate by 2018.

In particular, the companies' information technology and back office functions are highly scalable, Jamieson said. CI Financial will also look to consolidate a number of vendors to eliminate redundancies and use its size to negotiate new deals with the vendors, he added.

For 2018, CI Financial estimates that the combined company will generate total revenue of approximately $2.3 billion and net income of about $650 million. In addition, CI Financial expects to generate about $750 million of free cash flow in the year.

The deal is expected to close in late September.