Richardson GMP brokers getting tense as sale drama drags on
Publicly, we won’t be told any more about the state of play at Richardson GMP, the money manager with $27.2 billion of assets under management, in response to the latest news report of a possible sale. Instead we’ll have to rely on what was said internally.
On Monday, the firm, which has three groups of shareholders — the publicly-listed GMP, the Richardson family and the brokers — fired off a missive to all its employees in response to reports that TD Bank had lobbed a $600 million offer for the firm, one of the last large independent pools of brokers remaining in the country.
The message sent by Andrew Marsh, chief executive, was straightforward: There is no deal. If and when there is a deal we will let you know.
Almost two months back the market was informed, “regarding a possible transaction involving Richardson GMP,” because regulators requested GMP issue a statement in response to a news report. That news report lacked the detail of Monday’s report.
In that early September statement, GMP said “neither GMP’s management nor its board of directors has made any decision regarding a transaction involving Richardson GMP or the timing thereof.”
The statement concluded by saying that GMP “does not intend to provide further comment except as required by applicable securities laws or the policies of the Toronto Stock Exchange.”
One consequence of the ongoing drama is an increase in messages from clients to brokers and from brokers to RichGMP management. “This is now the first topic of conversation when a client calls,” noted one broker. “It’s disruptive to business,” said one long-standing broker.
If TD Bank does end up as the buyer of Richardson GMP and does pay $600 million, then the price will in the ballpark for what the bank paid to purchase New York-based EPOCH Partners in late 2012. EPOCH, which cost TD US$668 million, had US$24 billion under management.
But for the current acquisition, what’s not clear is what’s included in the mooted $600 million offer. It’s one thing if it just relates to the payment to Richardson GMP’s shareholders. In that case it works out at about $6 a share — which is more than what new employees would pay to get stock but way above what employees would receive if they left and wanted to sell their shares.
But it’s a different matter if the $600 million includes paying off the debt and preferred shares issued by RichGMP. One source said about $140 million has been issued. (GMP for instance, has invested $55.5 million in two preferred share issues and $8 million in a subordinated debt facility.)
And it’s an even different matter if it includes the retention payments the RichGMP brokers would want to sign on with TD. Those retention payments could be in the form of a small cash payment but lots of TD shares that vest over time.
Finally it’s not clear if the $600 million includes an amount to be put in reserve to cover the cost of settling a slew of lawsuits against the firm.
In a note issued Monday, Peter Routledge, financial services analyst at National Bank Financial, said: “Overall, this transaction would represent a small, but expensive, bolt-on transaction for TD.”