AGF buying Acuity in latest Canadian wealth deal

By John McCrank and Pav Jordan
TORONTO, Nov 30 (Reuters) - AGF Management Ltd (AGFb.TO) said on Tuesday it is buying privately held Acuity Funds Ltd for C$325 million ($316 million), as consolidation in Canada's wealth management sector heats up and mid-sized firms have a harder time competing.

AGF, one of Canada's largest independent investment management firms, said the deal would lead to quick organic growth of the new company as it adds customers in Canada and abroad and gains market share in fixed income, balanced and so-called socially responsible investing.

"There are two ways to grow bigger in this business, and one is organically," AGF Chief Executive Blake Golding told Reuters. "I think that we are going to be able to do lots, once Acuity and AGF are together, to really grow very quickly from an organic perspective, but also acquisitions will always be out there as an option."

AGF said the acquisition would add to earnings in 2011, but did not say by how much.
"AGF needs to increase its scale at this point and it should be a deal that ultimately is positive for margins," said Paul Holden, an analyst at CIBC, adding that the price appeared to be in line with recent deals in the sector.
Acuity manages about C$7.4 billion in assets for retail, institutional and high-net-worth investors. With the acquisition, AGF's assets under management (AUM) will rise to more than C$51 billion from about C$44 billion.

It was the second time in a week that a big player in Canada's wealth management sector has bought up a smaller firm and is the latest in a string of acquisitions in the sector.
"It's a fragmented market and players are consolidating," said National Bank Financial analyst Peter Routledge. "It's not unusual for sectors to consolidate after a downturn."

Last week, Canada's third-largest lender, Bank of Nova Scotia (BNS.TO), agreed to buy the 82 percent of DundeeWealth (DW.TO) it did not already own for C$2.3 billion, giving a significant boost to its domestic wealth management presence.

Royal Bank of Canada (RY.TO), the country's biggest bank, said last month it will buy Britain's BlueBay Asset Management (BBAY.L) for US$1.5 billion.
And industry consolidation will only continue as larger firms takeover smaller ones and target the growing numbers making up Canada's aging population who have retirement savings to invest.
Acuity founder and Chief Executive Ian Ihnatowycz said in a call with analysts that the consolidation drive was making it harder for mid-sized firms to compete.