Fiera Capital expands private debt and real estate lending with $74M IAM acquisition

Fiera Capital Corporation (TSX: FSZ) has entered into a definitive agreement to acquire all of the outstanding common shares of Integrated Asset Management Corp. (TSX: IAM) $2.576 per share for $74 million, representing total IAM enterprise value of $64 million and $10 million of adjusted cash.

The consideration will consist of $55.5 million in cash and $18.5 million of Fiera Capital Class A subordinate voting shares.

IAM’s private debt investment team will be incorporated within Fiera Private Lending and the industrial real estate team will be joining Fiera Properties, expanding the depth of strategies offered within Fiera Capital’s Private Alternative Investments platform.

Victor Koloshuk, AIM’s Executive Chairman, and Veronika Hirsch, an AIM Director, who collectively hold approximately 52.6% of the issued and outstanding IAM shares, have entered into hard lock-up agreements.

The transaction is expected to close in Q2 2019.

Concurrently with the signing of the agreement, IAM entered into agreements with head office employees providing for termination of employment effective upon the closing of the transaction and setting out payments and obligations related to the transaction and terminations, including severance, accrued bonuses and change of control payments.

Founded in 1998, Toronto based Integrated Asset Management Corp. offers a range of alternative strategies in real estate, private debt and infrastructure debt. AIM has approximately $2.3 billion in assets and committed capital under management with more than 36 employees in Toronto and Montreal.

Montreal based Fiera Capital Corporation is a global independent asset management firm with approximately C$136.7 billion in AUM as at December 31, 2018.

photo credit: IAM

News Release

Integrated Asset Management Announces Agreement to Be Acquired by Fiera Capital

TORONTO, March 22, 2019 (GLOBE NEWSWIRE) — Integrated Asset Management Corp. (“IAM”) (TSX: IAM) announced today that it has entered into a definitive arrangement agreement with Fiera Capital Corporation (“Fiera Capital”) (TSX: FSZ) (the “Agreement”) under which Fiera Capital will acquire all of the outstanding common shares of IAM (“IAM Shares”) pursuant to a statutory plan of arrangement under the Business Corporations Act (Ontario) (the “Transaction”).

Transaction Highlights:

  • Total consideration to IAM shareholders of $74 million consisting of $55.5 million in cash and $18.5 million of Fiera Capital Class A subordinate voting shares (“Fiera Capital Shares”).
  • In addition, IAM shareholders will receive contingent consideration from Fiera Capital in the form of contingent value rights (“CVRs”) tied to a portion of certain incentive fees that may be received in the future from two real estate funds managed by IAM affiliates, as further described below.
  • Represents IAM enterprise value of $64 million and $10 million of adjusted cash.
  • IAM shareholders may elect to receive cash and/or Fiera Capital Shares, subject to proration in certain circumstances, as further described below.
  • To the extent that IAM’s closing adjusted cash balance (as calculated under the Agreement, and further described below) exceeds $10 million, IAM will be entitled to declare and pay the excess amount as a special dividend to shareholders of record immediately prior to closing of the Transaction.

“Joining forces with Fiera Capital creates an opportunity for IAM shareholders to realize immediate value and liquidity as well as the opportunity to participate in a larger combined company well-positioned for future growth. We believe this is also a great opportunity for IAM employees to join the team at Fiera Capital,” said John Robertson, President and Chief Executive Officer of IAM.

Transaction Details

Total consideration under the Transaction is $74 million, representing total IAM enterprise value of $64 million and $10 million of adjusted cash. The consideration to be paid by Fiera Capital to IAM shareholders consists of $55.5 million in cash and $18.5 million of Fiera Capital Shares, or $2.576 per IAM Share. IAM shareholders will also receive contingent consideration in the form of one CVR for each IAM Share held, as further described below.

Under the terms of the Transaction, IAM shareholders may elect to receive, for each IAM Share held (i) $2.576 in cash, subject to proration such that the aggregate cash paid under the Transaction will not exceed $55.5 million, (ii) a number of Fiera Capital Shares (or a fraction of a Fiera Capital Share) equal to $2.576 divided by the volume-weighted average trading price of the Fiera Capital Shares on the Toronto Stock Exchange (the “TSX”) over the five trading days immediately preceding the business day immediately preceding the effective date of the Transaction (the “5-Day VWAP”), subject to proration such that the aggregate number of Fiera Capital Shares issued under the Transaction will not exceed $18.5 million in value, or (iii) $1.932 in cash and a number of Fiera Capital Shares (or a fraction of a Fiera Capital Share) equal to $0.644 divided by the 5-Day VWAP. The Transaction generally offers IAM’s taxable shareholders the opportunity to participate in the combined upside by rolling over their IAM Shares in a full or partial tax deferred manner for any Fiera Shares received pursuant to the Transaction, provided that the necessary conditions are satisfied and that tax elections are properly filed by the shareholder in a timely manner.

The CVRs to be received by IAM shareholders represent the contingent right of their holders to receive their pro rata portion of the aggregate cash payments from Fiera Capital which are based on the incentive fees (net of employee bonuses, certain taxes and expenses) (the “Net Incentive Fees”) received by IAM affiliates in connection with the management of two real estate funds, namely, GPM Real Property (11) Limited Partnership currently scheduled to mature in March 2021 and GPM Real Property (12) Limited Partnership currently scheduled to mature in March 2024. The amount that may become payable to CVR holders at a future date is uncertain and will depend on a number of factors, including the fair market value of the underlying real estate at the time any Net Incentive Fee is calculated. For certain purposes of the Transaction, including the amount to be attributed to the CVRs in any tax election that is filed by a shareholder, the parties have agreed to use the amount of $0.174 per CVR. IAM cautions that this amount may not represent the fair market value of the CVRs at the time of the Transaction, and that it is not possible to estimate what payments, if any, may be made on the CVRs and it is possible that no payment will ultimately be made on the CVRs.

In addition, to the extent that IAM’s closing adjusted cash balance (as calculated under the Agreement, which includes deductions for Transaction costs, including severance, accrued bonuses and change of control payments and other amounts and costs related to the Transaction and IAM head office employee terminations at closing) exceeds $10 million, IAM will be entitled to pay a special dividend to holders of IAM Shares of record immediately prior to closing of the Transaction. The amount of the special dividend to be paid, if any, will depend on such adjusted cash balance on the closing date for the Transaction and it is possible that no special dividend will be paid. The special dividend, if any, would be an eligible dividend for purposes of the Income Tax Act (Canada) and any applicable provincial taxing statutes, unless otherwise determined by IAM’s board of directors (the “Board”). Until the closing of the Transaction, IAM will cease to pay its regular dividend.

Outstanding IAM options will be exchanged for IAM Shares based on the in-the-money amount of such options and cash in an amount equal to the special dividend, if any, that would otherwise have been paid on such IAM Shares. Optionholders will then sell such IAM Shares to Fiera Capital as described above.

Upon closing of the Transaction, IAM understands that Fiera Capital intends to incorporate IAM’s private debt investment team within Fiera Private Lending and for IAM’s industrial real estate team to join Fiera Properties. Concurrently with the signing of the Agreement, IAM entered into agreements with head office employees providing for termination of employment effective upon the closing of the Transaction and setting out payments and obligations related to the Transaction and terminations, including severance, accrued bonuses and change of control payments.

Transaction Approvals and Special Meeting of IAM Shareholders

The Transaction will be implemented by way of a court-approved plan of arrangement under the Business Corporations Act (Ontario) and will be subject to the approval of 66 2/3% of the votes cast by IAM shareholders, and a simple majority of votes cast by minority holders of IAM Shares after excluding votes of any persons required under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions, each at a special meeting to be scheduled to consider the Transaction (the “Special Meeting”). The two largest IAM shareholders, Executive Chairman and director Victor Koloshuk and co-founder and director Veronika Hirsch (together, the “Significant Shareholders”), who collectively hold approximately 52.6% of the issued and outstanding IAM Shares (both of whom will be eligible to vote on the majority of the minority approval noted above) have entered into hard lock-up agreements, agreeing to vote their IAM Shares in favour of the Transaction for a period of six months following today’s date. Such hard lock-up agreements may not be terminated by the Significant Shareholders in the event of a superior proposal. Furthermore, certain other directors and senior officers of IAM, who hold collectively approximately 9.4% of the issued and outstanding IAM Shares, have entered into voting and support agreements in their capacities as shareholders, agreeing to vote their IAM Shares in favour of the proposed Transaction.

The Board has unanimously approved the Transaction and recommends that IAM shareholders vote in favour of the Transaction at the Special Meeting. The Board’s approval and recommendation were based in part on the unanimous recommendation of its special committee comprised solely of independent directors formed to consider the Transaction (the “Special Committee”) and on a fairness opinion received from Origin Merchant Partners, which concluded that, subject to the assumptions, limitations and qualifications set out therein, the consideration pursuant to the Transaction is fair, from a financial point of view, to the IAM shareholders (other than the Significant Shareholders).

The Transaction is not subject to a financing condition. In addition to IAM shareholder and court approvals, the Transaction is subject to regulatory approvals, IAM’s adjusted cash balance as calculated under the Agreement being at least $10 million at the effective date and closing conditions customary in transactions of this nature, including approval by the TSX for the listing of Fiera Capital Shares to be issued. The Agreement provides for customary deal protection provisions, including non-solicitation covenants and a right to match superior proposals in favour of Fiera Capital. The Agreement includes a termination fee of $2.5 million, payable by IAM to Fiera Capital in certain circumstances.

It is anticipated that the Special Meeting will be held in May 2019. The Transaction is expected to close in the second quarter of calendar year 2019. There is no assurance the Transaction will be completed as described above or at all, or that the anticipated closing date will materialize.

Further information regarding the Transaction will be contained in a management information circular that IAM will prepare, file and mail to IAM shareholders in advance of the Special Meeting. Copies of the Agreement and the management information circular will be available on SEDAR at www.sedar.com.

Advisors

Origin Merchant Partners is acting as financial advisor to the Special Committee, Goodmans LLP is acting as legal advisor to IAM and McMillan LLP is acting as legal advisor to the Special Committee. GMP Securities L.P. is acting as financial advisor to Fiera Capital and Fasken Martineau DuMoulin LLP is acting as legal advisor to Fiera Capital.

No Offer or Solicitation

This announcement is for informational purposes only and does not constitute an offer to purchase or a solicitation of an offer to sell IAM Shares or an offer to sell or a solicitation of an offer to buy Fiera Capital Shares.

None of the securities to be issued pursuant to the Agreement have been or will be registered under the United States Securities Act of 1933, as amended (the “US Securities Act”), or any state securities laws, and any securities issued in the Transaction are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Section 3(a)(10) of the US Securities Act and applicable exemptions under state securities laws.

About Integrated Asset Management Corp.

IAM is one of Canada’s leading alternative asset management companies with approximately $3.1 billion in assets and committed capital under management in private debt, infrastructure debt and real estate as of February 28, 2019. For more information, please visit: www.iamgroup.ca. IAM’s common shares trade on the TSX under the ticker symbol IAM.

About Fiera Capital Corporation

Fiera Capital Corporation is a global independent asset management firm with approximately C$136.7 billion in AUM as at December 31, 2018 delivering customized multi-asset solutions across traditional and alternative asset classes to institutional, retail and private wealth clients across North America, Europe and key markets in Asia. Fiera Capital strives to be at the forefront of investment-management science and is passionate about creating sustainable wealth for clients. Fiera Capital trades under the ticker FSZ on the Toronto Stock Exchange. www.fieracapital.com

In the U.S., asset management services are provided by the Firm’s U.S. affiliates who are investment advisers that are registered with the U.S. Securities and Exchange Commission (SEC). Further, the Firm’s affiliates Fiera Capital (UK) Limited and Fiera Capital (IOM) Limited are both registered as investment advisers with the SEC. Fiera Capital (UK) Limited is authorized and regulated by the Financial Conduct Authority in the United Kingdom and Fiera Capital (IOM) Limited is licensed by the Isle of Man Financial Services Authority. Registration with the SEC does not imply a certain level of skill or training.

Additional information about Fiera Capital Corporation, including the Firm’s annual information form, is available on SEDAR at www.sedar.com

For further information, please contact: Integrated Asset Management Corp.

John Robertson
President and Chief Executive Officer 416-360-7667

Ted Liu

Ted Liu, M.Sc. (Mining, Queen's), MBA (Finance, Toronto), is the Editor of Private Capital Journal, CanadaMetals.ca, TechWire.ca, and the former Editor of Canadian Private Equity. Ted has been passionately tracking Canadian private capital industry since 1992, having most recently served as Research Director for The Canadian Venture Capital and Private Equity Association (CVCA).

Ted is the architect of CVCA infobase, and is the architect of CPE Media's Financings.ca, Canada's most sophisticated and advanced all private capital and public market financing database.