CI Financial sale: The writing was on the wall, sources say

CI Financial Corp.’s sale for close to $8.7 billion to a sovereign wealth fund took some registered investment advisor market watchers by surprise Monday morning, while others said the sale of CI Financial, the Canadian parent of US RIA aggregator Corient, inevitable.

CI Financial’s CEO Kurt MacAlpine had periodically noted in public statements that he believed the share price of the asset management and RIA firm was undervalued.

Add in the fact that CI Financial in May 2023 announced the sale of a 20 percent private ownership stake in CI Private Wealth, and the writing was on the wall, industry sources said.

Private equity investors are likely to flip their investments if the opportunity arises, and shareholder will receive $22.90 per share, or Canadian $33 per share, a premium of 33 percent over the last closing price, once the deal is approved.  

“This is not an enormous surprise, the equity of the firm was materially undervalued by the public market,” said Peter Nesvold,  managing partner at Nesvold Capital. “It’s likely that the company will be split into parts and the RIA side, Corient, pursues an IPO.”

Corient, which changed its moniker from CI Private Wealth last year, was one of the most aggressive buyers of registered investment advisors and wealth management firms during the RIA buying boom of the last five years.

The CI Financial transaction means that the public and private equity investors get paid, and that’s broadly positive for RIA aggregators and firms in general, as well as providing Corient with new capital to buy more firms or develop under one brand, said Mark Tibergien, who retired as CEO of Pershing Advisor Solutions in 2020 and is now a management consultant.

“The high premium CI Financial is getting assumes a high rate of growth,” Tibergien said. “Will that be organic growth or through more RIA acquisitions?”

The deal announced Monday, which values CI's equity at $3.4 billion, is with Mubadala Capital, the alternative asset management arm of Mubadala Investment Company.

CI will continue to operate with its current structure and management team. Kurt MacAlpine, CEO of CI, will continue in his role. The shares held by members of senior management will enter into equity rollover agreements.

The deal, unanimously approved by a special committee of independent members of CI's board, recommends that CI shareholders vote in favor of the transaction. 

“This transaction, with its significant cash premium, represents an exceptional outcome for CI shareholders and provides certainty to shareholders while CI pursues its ongoing transformation,” said William E. Butt, CI’s lead director and chair of the special committee, in a statement. “It also provides significant benefits to Canada, by providing long-term capital to underpin the building of a Canadian champion in the wealth and asset management industries.”

Mubadala Investment Company is an Emirati sovereign investor headquartered in Abu Dhabi managing $302 billion in assets.