Mackenzie buys Power Corp.'s China Asset Management stake

Mackenzie Financial will double its ownership in China Asset Management Co. Ltd. to 27.8% as Mackenzie parent IGM Financial purchasing an additional 13.9% stake in a cash deal valued at C$1.15 billion ($898 million).

Under terms of a definitive agreement announced by IGM in a news release on Wednesday, IGM will buy the additional shares from its own parent, Power Corp. of Canada, a financial services management and holding company.

IGM said that the ownership position in China Asset Management will be consolidated at Mackenzie to help simplify IGM's and Power Corp.'s organizational structure.

To partly finance the transaction, IGM will sell about 15.2 million common shares of Great-West Lifeco to Power Financial Corp., a wholly owned subsidiary of Power Corp., for C$575 million, IGM noted in the release.

A spokesman for IGM said by email that Power Corp. owns a 64.3% stake in IGM through Power Financial Corp. This transaction will not change Power's stake in IGM, the spokesman noted.

The 13.9% stake in China Asset Management represented Power's remaining direct holdings in the Chinese firm.

IGM's stake in Great-West Lifeco will decrease from 4% to about 2.4%, valued at about C$830 million based on Great-West Lifeco's closing market price as of Jan. 5.

IGM will finance the remaining portion of the purchase with C$575 million cash from "existing financial resources."

The proposed transactions are expected to close in the first half of 2022, the release stated.

IGM further noted in the release that ChinaAMC is "one of the leading asset managers in China" and that the acquisition will enhance "participation in the rapidly growing Chinese asset management industry." The deal will also serve to help to reinforce "relationships and business opportunities between Mackenzie and ChinaAMC," while strengthening "distribution opportunities in China."

In addition, the acquisition is expected to be "accretive to IGM's earnings in the first year of increased ownership," the release noted.

Mackenzie acquired its original interest in ChinaAMC in 2017, the release indicated.

As of June 30, 2021, ChinaAMC had assets under management of almost 1.61 trillion renminbi ($253 billion) and the firm has undergone a compound annual growth rate in long-term mutual fund assets of nearly 40% over the past three years, IGM said in the release. ChinaAMC serves more than 75,000 institutional clients and 184 million retail investors, IGM noted.

In the third quarter of 2021, ChinaAMC posted after-tax net earnings of 636 million renminbi, a 56% year-over-year increase, IGM added in the release.

"The Chinese asset management industry is one of the largest and fastest growing markets in the world," stated James O'Sullivan, president & CEO of IGM in the release. "We believe that an expanded investment in ChinaAMC – one of the top three asset managers in (China) – is strategically important to position IGM for further growth."