GMP Capital selling capital markets business to U.S. firm Stifel Financial

TORONTO — Shares of GMP Capital Inc. soared after the Toronto-based financial services firm agreed to sell the bulk of its capital markets business to Stifel Financial Corp. in a deal worth roughly $70 million.

GMP's shares on the Toronto Stock Exchange surged after the announcement on Monday, closing at $2.29, up more than 13 per cent.

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Stifel, based in St. Louis, Missouri, will acquire substantially all of GMP's capital markets business excluding the U.S. cannabis sector and certain clearing businesses, it said in a statement on Monday.

After the transaction closes, GMP plans to make its wealth management business the core of its growth strategy going forward.

"With this sale, the GMP Board intends to deploy the corporation's strong capital position to focus and invest heavily in wealth management where we see significant opportunities to partner with the Richardson family, our top performing investment advisors and management at Richardson GMP to create significant long term value for shareholders," said Don Wright, GMP's chairman of the board and special committee in a statement.

The deal also excludes GMP's 33 per cent stake in Richardson GMP Ltd, a Canadian wealth management firm.

After the transaction is completed, GMP will continue to hold this stake, together with approximately $198 million of networking capital.

The Toronto-based firm also said Monday that its board is in talks with Richardson Financial Group Ltd., management of Richardson GMP and other stakeholders to acquire the share of the wealth management firm it does not already hold.

GMP chief executive Harris Fricker and other key personnel have agreed to join Stifel once the deal closes.

Stifel's chief executive and chairman Ronald J. Kruszewski said this acquisition is the "latest step in the build out of our premier middle market investment banking offering."

"The addition of GMP's capital markets business further enhances our institutional business given its strength in the Canadian markets and within the technology, health care, cannabis and energy verticals," he said in a statement.

Under the deal, Stifel, will pay the tangible book value of the business, less cash, plus $45 million.

The company said assuming the successful completion of the transaction it plans a one-time return of capital distribution of 27.5 cents per share.

The sale and the return of capital payment require approval by a two-thirds majority vote by shareholders.

The transaction is expected to close in the fourth quarter of 2019, subject to closing conditions.

Companies in this story: (TSX:GMP)

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