EQB to acquire 75% of ACM Advisors

CPE News

CPE News (10.3.2023) – EQB Inc. (TSX: EQB) has entered into a definitive agreements with ACM Advisors Ltd. pursuant to which EQB will acquire a 75% interest in ACM in a cash and share transaction.

Vancouver based ACM, an EMD, Investment Fund Manager and Portfolio Manager, specializes in the creation, structuring, and management of pooled Canadian commercial mortgage funds on behalf of pension plans, investment funds, charitable foundations, corporations, and accredited retail investors.

Founded by Al Collings and Gord Allan, ACM has grown to be one of the largest alternative asset managers with $4.8 billion in assets under management as of September 30, 2023.

Under the leadership of President & CEO Chad Mallow and COO Chad Mercer, ACM has nearly doubled its assets under management over the past five years.

The transaction is expected to close prior to end of calendar 2023.

ACM will operate as an independent majority owned subsidiary of EQB Inc.

photo credit: ACM

News Release

EQB Announces Agreement to Acquire Canadian Alternative Asset Manager ACM Advisors

EQB will enter asset management by acquiring an established leader in pooled commercial mortgage funds with an exceptional reputation for customer service
Brings immediate scale with nearly $5 billion in assets under management
EQB gains specialized capabilities to serve a new set of Canadian customers
Increases and diversifies fee-based revenue growth for EQB, in addition to non-interest revenue from wholly owned subsidiary Equitable Bank
Expected to be accretive to earnings per share (EPS) in the first year

TORONTO, Oct. 3, 2023 /CNW/ – EQB Inc. (EQB) (TSX: EQB) and (TSX: EQB.PR.C) and ACM Advisors Ltd. (ACM) jointly announced today that they have entered into a definitive agreements by which EQB will acquire a 75% interest in ACM in a cash and share transaction.

With $4.8 billion in assets under management as of September 30, 2023, ACM is one of the most respected independent alternative asset managers in Canada. Established in 1993 and based in Vancouver, British Columbia, ACM specializes in the creation, structuring, and management of pooled Canadian commercial mortgage funds on behalf of pension plans, investment funds, charitable foundations, corporations, and accredited retail investors. ACM will operate as an independent subsidiary of EQB (separate and distinct from EQB’s wholly owned subsidiary Equitable Bank, Canada’s Challenger BankTM).

EQB anticipates the acquisition will close before the end of 2023, subject to the receipt of regulatory approvals.

Strategic expansion into wealth management with a proven, well-established platform

Andrew Moor, President and CEO of EQB said: “Organically and through accretive acquisitions, we’ve positioned EQB to grow, innovate, and diversify as a leading Canadian financial services company. The addition of ACM Advisors, one of the most well-respected alternative fund managers in Canada with a focus on commercial assets, brings EQB an exciting platform for expansion with new capabilities. ACM’s pooled funds expertly invest in curated commercial real estate mortgages to deliver best-in-class long-term returns for its clients. This is an asset class EQB knows well since we have provided financing to commercial clients for more than 50 years within Equitable Bank. As part of EQB, ACM has the support to successfully scale in the years ahead.”

Chad Mallow, President and CEO of ACM said: “We’re delighted to join EQB as we continue to bring industry-leading asset management services to Canadian investors. We believe that a partnership with EQB will further accelerate our growth plans. We’re excited to continue to service new and existing clients while generating leading product solutions under the EQB Inc. brand.”

Combination Provides Immediate Accretion, Opportunities for Accelerated Growth

With a consistent track record of generating income while protecting investor capital, ACM continues to see significant opportunities for growth
EQB is supportive of business expansion efforts of the ACM leadership given the strong track record and ongoing investor demand for alternative assets in Canada
ACM will further diversify EQB’s earnings, with growth in fee-based revenue
EQB expects EPS accretion from the acquisition within the year following transaction closing
ACM will add 2,000+ client relationships, both investors and borrowers, to EQB

ACM Celebrates 30 Years of Growth and Performance

Co-founded by Al Collings and Gord Allan in 1993, ACM has grown to be one of the largest alternative asset managers in its niche and provides consistent returns to its investors through strong risk management practices and conservative portfolio management strategies
Under the leadership of President & CEO Chad Mallow and Chief Operating Officer Chad Mercer (its second-generation executive team), ACM has nearly doubled its assets under management over the past five years
ACM is represented by approximately 40 employees in four offices, with a strong investor base that includes more than 200 institutional clients across Canada
Existing management will remain with the business, including Messrs. Mallow and Mercer, both leaders of ACM for more than 10 years
Will operate as an independent majority owned subsidiary of EQB Inc.
Represents an asset class well understood by EQB as the owner of Equitable Bank, which has a commercial loan portfolio of $28 billion (70% of that invested in multi-unit residential housing) and a proven lending approach and risk management

Unanimous Approvals Given by All Parties to the Acquisition

The acquisition has been unanimously approved by the Boards of Directors of EQB, ACM and all shareholders of ACM.

Fully Financed Acquisition

EQB is leveraging cash to complete the acquisition, supported by existing lending facilities at EQB, and a de minimis number of EQB shares to be issued at closing at a price based on the volume weighted average trading price. The issuance of any EQB shares is subject to TSX acceptance or approval.

Transaction Advisors

McCarthy Tetrault LLP is acting as legal advisor to EQB, Borden Ladner Gervais LLP is acting as legal advisor to ACM, and Fort Capital Partners is acting as financial advisor to ACM.

Closing Expected Prior to End of Calendar 2023

The acquisition is expected to close prior to end of calendar December 31, 2023 (EQB’s fiscal year 2024, which starts November 1, 2023) and is subject to customary closing conditions and receipt of required regulatory approvals. EQB next reports Q4 and full year fiscal 2023 results on December 7, 2023.

“Wealth management, and the many market segments it represents, is strategic to EQB and we believe this acquisition is directly on point for us with the underlying focus on Canadian commercial assets and providing exceptional service to customers. With these new capabilities, deep management team and dynamic range of long-term clients, this accretive acquisition will build on the diversification and momentum of EQB and the differentiated solutions we offer to Canadians. It addresses our goal of growing and diversifying fee-based revenue, and ACM aligns extraordinarily well to our risk appetite and approach to ROE and value creation,” said Chadwick Westlake, Chief Financial Officer of EQB.

Analyst Conference Call and Webcast: 9:00 a.m. Eastern Today

EQB will host an investor call to discuss the acquisition today, October 3, 2023, at 9:00 a.m. ET. The call will include Chadwick Westlake, CFO of EQB.

To access the call live, please dial (416) 764-8668 five minutes prior to the start time. The listen-only webcast with accompanying slides will be available at eqbank.investorroom.com/events-webcasts.

Call Archive

A replay of the call will be available until October 10, 2023 at midnight at (416) 764-8677 (passcode 929640 followed by the number sign). Alternatively, the webcast will be archived at eqbank.investorroom.com/events-webcasts.

About EQB Inc.

EQB Inc. and its subsidiaries are driving change in Canadian banking to enrich people’s lives. EQB Inc. trades on the Toronto Stock Exchange (TSX: EQB and EQB.PR.C) and has nearly $108 billion in combined assets under management and administration as of June 30, 2023. The wholly owned subsidiary of EQB, Equitable Bank, Canada’s Challenger BankTM, is the seventh largest bank in Canada by assets and serves over 543,000 Canadians.

About ACM Advisors

ACM Advisors is a leading Canadian institutional alternative asset manager with $4.8 billion in assets under management across four funds. Founded in 1993, ACM has grown to be one of the largest private investment fund managers in Canada, specializing in the creation, structuring and management of pooled Canadian commercial mortgage funds. Based in Vancouver, BC, ACM has 30+ year track record of successful performance.

For More Information:

Sandie Douville
Vice President, Investor Relations & ESG Strategy
investor_enquiry@eqbank.ca
437-855-5938

Cautionary Note Regarding Forward-Looking Statements

Statements made by EQB in the sections of this news release, in other filings with Canadian securities regulators and in other communications include forward-looking statements within the meaning of applicable securities laws (forward-looking statements). These statements include, but are not limited to, statements about the expected closing of the acquisition, receipt of regulatory approvals, expected EPS accretion from the acquisition, the issuance of EQB stock in connection with the acquisition, EQB’s objectives, strategies and initiatives, financial performance expectations and other statements made herein, whether with respect to EQB’s businesses, ACM or the Canadian economy. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “planned”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases that state that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”, or other similar expressions of future or conditional verbs. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, closing of transactions, performance or achievements of EQB to be materially different from those expressed or implied by such forward-looking statements, including but not limited to risks related to capital markets and additional funding requirements, fluctuating interest rates and general economic conditions, legislative and regulatory developments, changes in accounting standards, the nature of our customers and rates of default, and competition, as well as those factors discussed under the heading “Risk Management” in the MD&A and in EQB’s documents filed on SEDAR at www.sedar.com. All material assumptions used in making forward-looking statements are based on management’s knowledge of current business conditions and expectations of future business conditions and trends, including their knowledge of the current credit, interest rate, and liquidity conditions affecting EQB, its subsidiaries, and the Canadian economy. Although EQB believes the assumptions used to make such statements are reasonable at this time and has attempted to identify in its continuous disclosure documents important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Certain material assumptions are applied by EQB in making forward-looking statements, including without limitation, assumptions regarding its continued ability to fund its mortgage business, a continuation of the current level of economic uncertainty that affects real estate market conditions, continued acceptance of its products in the marketplace, as well as no material changes in its operating cost structure and the current tax regime. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. EQB does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws.

Non-Generally Accepted Accounting Principles (“GAAP”) Financial Measures

This news release references certain non-GAAP measures, such as Return on equity (ROE), Adjusted EPS, Book value per common share, Assets under management, Conventional loans, CET1 ratio, Efficiency ratio, Loans under management, Liquid assets, which management believes provide useful information to investors regarding EQB’s financial condition and results of operations. See the “NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”) FINANCIAL MEASURES AND RATIOS” section of EQB’s Q2 2023 Management’s Discussion and Analysis (“MD&A”). The MD&A provides a detailed description of each non-GAAP measure and should be read in conjunction with this release. The MD&A also provides a reconciliation between all non-GAAP measures and the most directly comparable GAAP measure, where applicable. Readers are cautioned that non-GAAP measures often do not have any standardized meaning, and therefore, may not be comparable to similar measures presented by other companies.

SOURCE Equitable Group Inc.