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Canaccord’s Vow to Sweeten Bid Sends RF Capital to 18-Month High

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Kevin Orland
·3 min read
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(Bloomberg) -- Canadian investment firm RF Capital Group Inc. jumped to its highest point since October 2019 after rival Canaccord Genuity Group Inc. said it’s willing to “substantially” raise its takeover offer.

Toronto-based RF Capital rose as much as 12% to C$2.40 in Toronto after Canaccord Chief Executive Officer Dan Daviau told Bloomberg his firm is ready to boost its bid to seal a deal. RF rebuffed Canaccord’s initial proposal of C$2.30 per share.

“We’re prepared to increase our price substantially, but we don’t know what price they’re looking for because they won’t talk to us,” Daviau said in an interview. A transaction would unite two of Canada’s largest remaining independent firms in wealth management, a part of the industry that’s dominated by the country’s large banks.

The updated proposal would include improved terms for RF Capital’s investment advisers, Daviau said, allowing them to cash out some holdings of shares held in escrow. He declined to say what price Canaccord would be willing to pay. The current proposal values RF at C$367 million ($292 million).

Richardson Control

Canaccord has little prospect of taking control of RF without winning the support of the Richardson family, whose closely held conglomerate, James Richardson & Sons Ltd., owns 44% of RF Capital, according to data compiled by Bloomberg.

RF Capital’s minority shareholders “should be provided an opportunity to consider the proposal,” Canaccord said Wednesday in a written statement. “Canaccord Genuity is exploring legal options available, as well as options of taking our offer directly to RCG shareholders.”

RF Capital shares gained nearly 8% Wednesday as of 12:48 p.m. Wednesday and are up 31% since Canaccord’s interest became public in March.

Canaccord has said that combining the firms would provide RF Capital’s investors with better value for their shares and open opportunities for RF’s wealth advisers. By publicly disclosing the proposal, Daviau is making an open appeal to those advisers, who form an influential bloc within RF because they collectively own 31% of the shares.

RF has repeatedly rejected Daviau’s approach. “After consideration, the Board has again determined that pursuing your proposal is not in the best interests of RF Capital Group Inc.,” Chairman Donald Wright said in a letter posted on the company’s website, without elaborating.

Canaccord’s wealth unit had C$85.2 billion in client assets as of Dec. 31, according to an investor presentation. RF had C$32.7 billion in assets under administration as of March 31.

Until last year, RF Capital operated under the name GMP Capital. It used to be a major player in investment banking and trading in Canada’s junior energy and mining markets, but it sold its capital markets business to Stifel Financial Corp. in 2019 to focus on wealth management and investment advice.

(Updates with share price move and other new information)

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