Purpose Investments Inc. has entered an agreement to acquire substantially all of the retail asset management agreements owned by LOGIQ Asset Management Inc. (TSX: LGQ) and its affiliates for $32.9 million.
The transaction is expected to close by the end of December, is subject to a number of conditions precedent including the approval by the holders of securities of the funds for which management contracts are to be acquired by Purpose, approval by the holders of the LOGiQ common shares and the 7.00% senior unsecured convertible debentures due June 30, 2021.
FS Group Holdings Ltd. which holds an aggregate of 28% of LOGiQ common shares has entered into a voting support agreement to, among other things, vote in favour of the transaction.
In May 2017, OMERS Platform Investments acquired a minority interest in Purpose Investments Inc. John Ruffolo, CEO of OMERS Ventures, joined Purpose Investments board following the investment.
“The retail funds industry is experiencing massive change and ongoing consolidation. We believe that as scale becomes critical for retail fund managers, the benefits of a larger platform such as Purpose’s will translate into significant benefits for fund investors. This transaction will also materially improve the Company’s balance sheet and liquidity, and will allow us to focus on pursuing growth outside the retail funds sector, including a focus on growing our institutional global sales business under the direction of Steve Mantle and our institutional and private client business managed by Barry Morrison,” said LOGiQ President and CEO, Joe Canavan. “As we exit the retail funds business, we intend to retire the vendor note issued in connection with the acquisition of the Global Advisor platform from Integra Capital Limited in December, 2016 and to pay down the drawn amount, if any, on the Company’s working capital facility established in August with R.C. Morris & Company Capital Management. We also intend on significantly reducing the Company’s cost structure going forward as part of this transition.”
In August 2017, LOGiQ entered into a loan agreement R.C. Morris & Company Capital Management to provide a working capital term loan facility for up to $6,000,000 bearing interest on amounts drawn, if required, at rates between 16% to 19% per annum.
“We are excited to acquire these high-quality, well-managed investment funds from LOGiQ,” said Purpose President and Chief Executive Officer, Som Seif. “Expanding and complementing our active management business continues to be an important part of our growth strategy at Purpose. This transaction will allow us to further expand our investment offerings and provide Canadians with an even broader selection of well-diversified portfolio solutions.”
“As one of Canada’s leading independent investment management firms, we look forward to growing these funds and continuing to deliver outstanding performance for our clients,” continued Seif. “Over the next several months, we will work hard to better align the products through strategy enhancements and lower overall fees, with Purpose’s overall goals to provide accessible, intelligent solutions that help Canadians drive better portfolio outcomes.”
Canaccord Genuity Corp. is acting as financial advisor to the Special Committee of the board of directors of LOGiQ. LOGiQ’s legal counsel is Blake, Cassels & Graydon LLP. Purpose’s legal counsel is Osler, Hoskin & Harcourt LLP.
Purpose has over $3.4 billion in assets under management and currently offers 35 exchange traded funds and mutual funds and 7 closed-end funds across multiple asset classes and both traditional and alternative investment strategies.
LOGiQis a diversified asset management company with a suite of retail mutual funds, closed end funds, hedge funds and pooled funds, and also provides segregated institutional managed accounts and institutional advisory sales. Excluding the retail assets under management that are the subject of the transaction, LOGiQ has assets under management or advisement, and institutional advisory sales-related fee earning arrangements that are not managed or advised, totaling approximately $3.5 billion as at August 11, 2017.
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