The latest wealth management acquisition by Bank of Montreal will expand its mutual fund reach in Canada to include funds sold through independent advisors not affiliated with the bank.
Bank of Montreal will be the new owner of Guardian Group of Funds, the mutual funds subsidiary of Guardian Capital Group, an independent money manager in Toronto. Bank of Montreal, which like all of Canadian banking's Big Five is based in Toronto, has agreed to acquire the Guardian subsidiary for $118 million, to be paid in common shares of the bank.
"This is a strategic transaction that gives us an excellent platform to continue to grow our mutual-fund business, with the addition of an important new distribution capability through the advisor channel," said William Downe, deputy chairman of Bank of Montreal.
The takeover, which requires the approval of two-thirds of the shareholders of Guardian Capital, which is listed on the Toronto Stock Exchange, will be confirmed at a special meeting set for June 25.
Gaining the approval is a foregone conclusion since more than two-thirds of Guardian shareholders, mostly company management and other insiders, have agreed to tender to the offer. The largest block of shares is the 43.8 percent controlled by John Christodoulou chairman and CEO.
Gilles Ouellette, president and CEO of the private client group of Bank of Montreal, estimated that about 65 percent of mutual fund assets in Canada are bought through full-service brokers and financial planners.
"Guardian gives us significant entry into this extremely important channel," he said.
While strategically significant, the takeover of Guardian is a relatively modest move when compared to the biggest fund-company takeovers in Canada over the past year or so. Earlier this year, the largest fund complex, Investors Group of Winnipeg, Manitoba, bought Mackenzie Financial of Toronto, and last year Amvescap of London acquired Trimark Financial, also of Toronto.
Both Mackenzie Financial and Trimark Financial ranked among the top five in assets as independent firms. By contrast, the Guardian mutual funds have total assets of about $1.3 billion, and ranked 27th in size in the industry rankings compiled by the Investment Funds Institute of Canada.
Taking over Guardian does not move Bank of Montreal any higher in the mutual fund hierarchy. Guardian's assets, combined with the $7.6 billion in the bank's family of no-load funds sold mainly through its bank branches and discount brokerage arm, still leave Bank of Montreal at 12th place in the institute rankings.
The Guardian family of funds is the fifth acquisition in less than two years by Bank of Montreal's private client group, which is focused on wealth management and has total assets under administration and management (including term deposits) of more than $150 billion, the bank said.
The remaining four, also relatively small, have been in the U.S. They are Century Bank of Scottsdale, Ariz., Freeman Welwood, a direct brokerage in Seattle and Village Banc of Naples, Fla., all acquired in 2000, and a direct brokerage in Chicago acquired in 1999 and now known as Harris InvestorLine. The four U.S. acquisitions were made through The Harris, the wealth management arm of Harris Bank of Chicago, Bank of Montreal's U.S. subsidiary.
The addition of Guardian will boost Bank of Montreal's total fund assets under management, including U.S.-based funds, to about $20 billion. Other fund families under the bank's umbrella included the Harris Insight funds sold in the U.S., proprietary funds offered by its Canadian full-service brokerage BMO Nesbitt Burns, and the Monogram funds sold in Canada to high-net-worth clients.
Bank of Montreal has appointed Barry Cooper, who retains his existing role as chairman and CEO of Jones Heward Investment Counsel, the bank's money manager in Toronto, as head of all mutual fund operations on both sides of the border.