GMP Capital Inc. Announces Sale of Capital Markets Business to Stifel Financial Corporation

TORONTO, June 17, 2019 /CNW/ - GMP Capital Inc. ("GMP" or the "Corporation") (TSX: GMP) announced today that it has entered into a definitive agreement (the "Agreement") to sell substantially all of its capital markets business to Stifel Financial Corp. ("Stifel") (the "Transaction") in an all cash transaction.

The entering into of the Agreement follows a comprehensive strategic review process overseen by a committee of GMP's board of directors (the "GMP Board") comprised exclusively of independent directors (the "Special Committee"). In its review, the Special Committee considered numerous alternatives and recommended to the GMP Board that the Transaction is in the best interest of the Corporation.

"Our capital markets business has been the core focus of our company offering great services and excellent execution to clients in select markets under the leadership of Harris Fricker and his talented team of investment professionals. The GMP Board's decision to sell this business reflects our belief that our clients and employees will enjoy substantial benefit from the expanded opportunities and necessary critical mass that a world class player like Stifel brings to the table," said Don Wright, Chairman of the Board and Special Committee.  "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," continued Mr. Wright.

Stifel is a U.S. financial services holding company (NYSE: SF) headquartered in St. Louis, Missouri, that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel has a market capitalization of more than $4 billion, annual net revenue of $3.1 billion, and over 7,500 associates worldwide. Stifel is a premier middle market wealth management and investment banking firm serving clients in North America and Europe. 

"The acquisition of GMP's capital market business is the latest step in the build out of our premier middle market investment banking offering.  Over the past 13 years, we have grown our annual institutional net revenues from roughly $60 million to more than $1 billion through a combination of strategic acquisitions and strong organic growth.  The addition of GMP's capital markets business further enhances our institutional business given its strength in the Canadian markets and within the technology, healthcare, cannabis and energy verticals," stated Ronald J. Kruszewski, Chairman and CEO of Stifel Financial Corp.

Transaction Details

Pursuant to the Agreement, Stifel will acquire the bulk of GMP's capital markets business for cash consideration to be determined at closing of the Transaction based on the then tangible book value of the business (less cash) plus $45 million, subject to adjustment. As of April 30, 2019, the purchase price would have been approximately $70 million. The Agreement includes customary non-solicitation covenants and provides that GMP will be required to pay a break fee of $2.625 million in the event the Agreement is terminated in certain circumstances.  Effective at the closing of the Transaction, Harris Fricker, CEO of GMP, and other key personnel have agreed to join Stifel.

"We are excited to be joining forces with a like-minded partner and proven operator in Stifel.  The combination with Stifel is immensely attractive to us given it provides greater critical mass and access to significantly enhanced cross border capabilities to better serve our clients.  I believe this transaction with Stifel and the considerable capabilities they bring to the table will allow our team to fuel further disruption in the small- to mid-cap segments of the Canadian capital markets," said Harris Fricker, CEO of GMP.

Focused on Accelerating Wealth Management Growth

Immediately following the closing of the Transaction, GMP will continue to hold its 33% interest in Richardson GMP Limited ("Richardson GMP") together with approximately $198 million of net working capital.  GMP intends to make wealth management the centerpiece of the Corporation's growth strategy going forward. Accordingly, the GMP Board is currently engaged in discussions with Richardson Financial Group Limited ("RFG"), management of Richardson GMP and the representatives of the investment advisors on Richardson GMP's board to acquire 100% of Richardson GMP.  Any such acquisition would be undertaken in accordance with the shareholders agreement governing Richardson GMP.  Richardson GMP is one of Canada's leading independent wealth management firms, managing client assets of approximately $30 billion and generating adjusted EBITDA¹ in excess of $45 million.

A key part of this strategy will call for the Corporation to leverage its strong capital position following the closing of the Transaction to accelerate the growth of the wealth management business through aggressive recruitment of Canada's top performing investment advisors, targeted acquisitions of like-minded wealth management firms, including family offices, and through expansion of its comprehensive suite of unique wealth management products across the entire household balance sheet. 

"The GMP Board believes the opportunities in wealth management are immense and that is precisely why we have chosen to accelerate an aggressive approach to growth at Richardson GMP.  We are confident that with a powerful long term partner in the Richardson family and some of the country's top investment advisors, we are uniquely positioned to continue to build one of the best wealth management firms in Canada.  With the announcement of the sale of the capital markets business we will be exclusively focused on working to achieve that end.  Focusing on wealth management offers the greatest potential for long-term value creation for shareholders," said Mr. Wright.

Hartley Richardson, President and Chief Executive Officer of James Richardson & Sons, Limited added, "We are very pleased with this opportunity to reinforce and renew our long-term commitment to Richardson GMP, and to provide our expertise, reputation, and brand as we continue to build a firm that serves the complete wealth management needs of Canadian families. We fully support the transaction with Stifel and the decision by GMP's Board to take the appropriate steps to make Richardson GMP the engine for future growth in value for GMP shareholders. We also believe that GMP's refocus on wealth management will be of great benefit to Richardson GMP's investment advisors, employees, and their clients."

There can be no assurance that any transaction involving Richardson GMP will result from the discussions with RFG or on what terms or structure any transaction may occur.

Return of Capital Distribution

Assuming the successful completion of the Transaction, the GMP Board intends to pay to holders of its common shares ("Shareholders") a one-time return of capital distribution in the amount of $0.275 per common share. 

Dividends

GMP's Board intends to continue to pay regular dividends at the current rate.  The declaration and payment of dividends remain at the discretion of the GMP Board and in normal course will continue to be reviewed by the GMP Board.

Unanimous Approval of the Board and Special Committee

After considering the recommendation of the Special Committee, the GMP Board has determined that the Transaction is in the best interest of the Corporation and has unanimously approved entering into the Agreement. The GMP Board recommends that Shareholders vote in favour of approving the Transaction at a special meeting of Shareholders (the "Meeting") to consider the Transaction. Each of Lazard Canada Inc. and Sheumack & Co. GMA, LLC. provided its opinion to the Special Committee as of June 16, 2019, and subject to the assumptions, limitations and qualifications set forth therein, that the consideration to be paid to the Vendors (as defined in the Agreement) is fair, from a financial point of view, to the Vendors.

Shareholder Approval and Other Conditions

The Transaction and the return of capital distribution are each subject to approval of at least two-thirds (66^2/3%) of the votes cast by the holders of GMP common shares at a meeting of such Shareholders, which is expected to be held in August 2019. Richardson Financial Group Limited, GMP's largest shareholder, and members of the GMP Board, collectively representing over 25.3% of the outstanding common shares (calculated on a non-diluted basis), have entered into voting agreements with Stifel pursuant to which they have agreed to vote in favour of the Transaction at the Meeting. 

The terms and conditions of the Agreement will be disclosed in greater detail in a management information circular (the "Information Circular") that is expected to be mailed to Shareholders in the coming weeks. The Transaction is expected to close in the second half of this year, subject to Shareholders approval, customary closing conditions and regulatory approvals.

Copies of the Agreement and of the Information Circular for the Meeting will be filed with Canadian securities regulators and will be available on the SEDAR profile of GMP at www.sedar.com. Shareholders are urged to read the Information Circular and the other relevant materials when they become available as such materials will contain important information regarding the Transaction.  An investor presentation regarding the Transaction is also available on the Corporation's website at www.gmpcapital.com.

Advisors

Lazard Canada Inc. acted as the financial advisor to the Special Committee in connection with the strategic review process and the Agreement. Lazard Canada Inc. and Sheumack & Co. GMA, LLC. provided opinions to the Special Committee. Stikeman Elliott LLP acted as legal advisor to the Special Committee and Goodmans LLP acted as counsel to the Corporation. Keefe, Bruyette & Woods, A Stifel Company, acted as financial advisor to Stifel in the Transaction, with Sullivan & Cromwell LLP serving as legal counsel to Stifel.

About GMP Capital Inc.

GMP is a leading independent diversified financial services firm headquartered in Toronto, Canada, providing a wide range of financial products and services to a client base that includes corporate clients, institutional investors and high-net-worth individuals in two integrated reporting segments. The Capital Markets segment provides investment banking, including advisory and underwriting services, institutional sales and trading and research through offices in Canada, the United Kingdom, and the Bahamas. Wealth Management consists of GMP's non-controlling ownership interest in Richardson GMP Limited. Richardson GMP Limited is one of Canada's leading wealth management firms, focused on providing exclusive and comprehensive wealth management and investment services delivered by an experienced team of investment professionals. GMP is listed on the Toronto Stock Exchange under the symbol "GMP". For further information, please visit our corporate website at gmpcapital.com.

About Stifel Financial Corp.
Stifel Financial Corp. (NYSE: SF) is a financial services holding company headquartered in St. Louis, Missouri, that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel's broker-dealer clients are served in the United States through Stifel, Nicolaus & Company, Incorporated; Keefe Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC; and Century Securities Associates, Inc., and in the United Kingdom and Europe through Stifel Nicolaus Europe Limited. Stifel Financial Corp.'s broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Stifel Bank & Trust offers a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A., and Stifel Trust Company Delaware, N.A., offer trust and related services. To learn more about Stifel, please visit the Stifel website at www.stifel.com.

About Richardson GMP
As one of Canada's leading wealth management firms, Richardson GMP provides exclusive and innovative investment solutions to successful families and entrepreneurs across Canada. Since 2010, Richardson GMP has been awarded top ranking in the Investment Executive Brokerage Report Card for products and services dedicated to high net worth investors. Reflecting their commitment to high standards, Richardson GMP has earned certification – determined annually – from the Center for Fiduciary Excellence (CEFEX) for their Separately Managed and Portfolio Management Account platforms.  Most recently, Richardson GMP was recognized as one of Canada's Best Workplaces^TM for 2019. www.RichardsonGMP.com

Reader Advisory

Cautionary Note on Forward Looking Statements

This press release contains forward-looking statements within the meaning of Canadian securities laws. These forward-looking statements contain statements of intent, belief or current expectations of GMP. Forward-looking information is often, but not always identified by the use of words such as "anticipate", "believe", "expect", "plan", "intend", "forecast", "target", "project", "may", "will", "should", "could", "estimate", "predict" or similar words suggesting future outcomes or language suggesting an outlook.

The forward-looking statements included in this press release, including statements regarding the Transaction, the receipt of necessary regulatory and Shareholder approvals and satisfaction of other closing conditions, the anticipated timing for mailing the Information Circular, holding the Meeting, completing the Transaction, the nature of GMP's growth strategy going forward and execution on any of the potential plans (including the potential acquisition of 100% of Richardson GMP) are not guarantees of future results and involve risks and uncertainties that may cause actual results to differ materially from the potential results discussed in the forward-looking statements. In respect of the forward-looking statements and information concerning the completion of the Transaction and the anticipated timing for completion of the Transaction, GMP has provided such in reliance on certain assumptions that it believes are reasonable at this time, including assumptions as to the timing of the mailing of the Information Circular, the Meeting and the closing of the Transaction, the ability of the parties to receive, in a timely manner and on satisfactory terms, the necessary regulatory and Shareholder approvals, the ability of the parties to satisfy, in a timely manner, the other conditions to the closing of the Transaction, and the Corporation's strategy going forward, including in respect of the Richardson GMP business. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release.

Risks and uncertainties that may cause such differences include but are not limited to: the risk that the Transaction may not be completed on a timely basis, if at all; the conditions to the consummation of the Transaction may not be satisfied; the risk that the Transaction may involve unexpected costs, liabilities or delays; the risk that, prior to the completion of the Transaction, GMP's business may experience significant disruptions, including loss of clients or employees, due to transaction related uncertainty or other factors; the possibility that legal proceedings may be instituted against GMP and/or others relating to the Transaction and the outcome of such proceedings; the possible occurrence of an event, change or other circumstance that could result in termination of the Transaction; risks related to the diversion of management's attention from GMP's ongoing business operations; risks relating to the failure to obtain necessary regulatory and Shareholder approvals; risks related to the Corporation's strategy going forward, risks related to the failure to satisfy the conditions to complete the Transaction; other risks inherent in the financial industry. Failure to obtain the requisite approvals, or the failure of the parties to otherwise satisfy the conditions to or complete the Transaction, may result in the Transaction not being completed on the proposed terms, or at all. In addition, if the Transaction is not completed, and GMP continues in its current form, the announcement of the Transaction and the dedication of substantial resources of GMP to the completion of the Transaction could have a material adverse impact on GMP's share price, its current business relationships (including with future and prospective employees, clients and partners) and on the current and future operations, financial condition and prospects of GMP and Richardson GMP. When relying on forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect GMP's operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

The forward-looking statements in this press release are made as of the date it was issued and GMP does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that outcomes implied by forward-looking statements will not be achieved. GMP cautions readers not to place undue reliance on these statements.

SOURCE GMP Capital Inc.

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