Manulife to buy AIC Ltd. retail fund business, price not disclosed

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TORONTO - Canada's largest life insurance company announced Wednesday it is purchasing the retail investment business of AIC Ltd., one of a dwindling number of independent domestic players in a business that's increasingly dominated by the country's largest financial institutions.
After the transaction, Manulife Financial Corp. (TSX:MFC) will have about $13.7 billion of assets under management for Canadians in retail mutual funds, the company said.
That will boost the insurance company's Canadian mutual fund business by about 38 per cent, according to recent industry figures.
The price of the transaction, expected to close by Sept. 25 subject to regulatory approval, wasn't disclosed.
It was unclear whether the deal will result in any layoffs, including among the 155 people currently employed at AIC.
"We've just announced the agreement, so it's fairly premature to say what any impact would be on employees, but what we do know is that some AIC employees will be joining Manulife and AIC will retain some employees as well," a Manulife spokesman said.
AIC spokeswoman Terri Oswald agreed.
"Nothing will be finalized until Sept. 25 and then after that they'll start to look at both businesses, business requirements and all that kind of stuff," said Oswald, who called the deal a "win-win on both sides."
Manulife Mutual Funds will manage all AIC Funds in Canada under the agreement, but AIC Investment Services will remain as subadviser to nearly a dozen individual mutual funds.
"The subadvisory agreement with Manulife provides us an ideal opportunity to not only return to our roots but also to build out our investment advisory services," said Jonathan Wellum, AIC's CEO and chief investment officer.
"In turn, Manulife is able to significantly strengthen its product depth and breadth. Manulife is well-established and well-respected within Canada and we remain pleased that Manulife Financial is the purchaser of our retail fund business," Wellum added.
Paul Rooney, the president and chief executive officer of Manulife Canada, said in a statement that AIC is a strategic fit for the two companies.
"Both Manulife and AIC Ltd. have similar strong cultures designed to serve the needs of investors through independent advisers," added Rooney. "We now have an excellent opportunity to broaden Manulife's position in Canada's wealth management market, while providing AIC's fund clients access to Manulife's broad platform of insurance, wealth and banking products and services."
Canada's mutual fund industry is increasingly dominated by big banks, which are able to use their extensive system of branch offices, call centres and websites to reach a mass market of individuals looking for places to invest their money.
Winnipeg-based IGM Financial (TSX:IGM), a subsidiary of the Montreal-based Power Corporation group of financial services companies, had been a perennial market leader until overtaken for the top spot by Royal Bank (TSX:RY).
Bank of Nova Scotia (TSX:BNS) - which had lagged its peers in the domestic mutual fund and wealth management industry - has recently acquired significant stakes in CI Financial Corp. (TSX:CIX) and DundeeWealth Inc. (TSX:DW), which conduct much of their retail business through independent advisers.
AIC is a private company based in Burlington, Ont., controlled by Michael Lee-Chin. According to recent figures compiled by the Investment Funds Institute of Canada, it had about $3.7 billion in mutual funds under management in June.
AIC was acquired by Lee-Chin in 1987, when it had less than $1 million in assets under management. He currently controls AIC through Portland Holdings Inc., a privately held company with investments in a variety of industries.
AIC Investment Services will be renamed after the Manulife deal closes and remain a Portland company.
"While a number of our staff members are expected to join the Manulife organization, we intend to remain an active employer within the Burlington community as we have been for years," Lee-Chin said in a statement.
Manulife previously acquired another Portland company, Berkshire Investment Group, in 2007.
"Manulife has proven to be an outstanding steward of that business and, in my opinion, the company's scope and brand have contributed to the creation of a pre-eminent independent adviser platform in the country," Lee-Chin said.
"I am confident that Manulife can accomplish the same success with AIC."
Manulife shares traded Wednesday at $22.36, up 17 cents, after the announcement. The company's stock has endured a tumultuous 12 months on the markets, falling from a high of $39.40 to a low of $9.02 in March.
Earlier this month, the company announced it was cutting its quarterly dividend in half, despite the fact it reported a 76 per cent surge in profits during the second quarter, a moved expected to save about $800 million a year.

Organizations: Manulife Financial, AIC Ltd., TSX AIC Investment Services AIC Funds Bank of Nova Scotia IGM Financial Power Corporation CI Financial DundeeWealth Inc. Investment Funds Institute of Canada Portland Holdings Manulife organization Berkshire Investment Group

Geographic location: Canada, TORONTO, Burlington Portland

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