Scotia Financial & CI Financial
First Published: October 7, 2008 ADawnJournal.com
On Monday morning, investors around globe woke up with a little surprise. The news broke out confirming Sun Life Financial Inc. has agreed to sell its 37% stake in CI Financial Income Fund to Bank of Nova Scotia for $2.3 Billion in cash. Sun Life first bought 30% of CI in July 2002.
CI is Canada’s number three fund company by assets under management. CI is well known for its wide selection of funds, top-rated portfolio and fund managers, expertise in international funds, and for creating innovative products. CI Pacific is one of the first Asian funds in Canada, CI was the first company to offer tax efficient corporate class funds, CI was the first fund company to pioneer and launch segregated funds.
This deal puts Sun life on fire by increasing its capital. Sun Life is seeking growth opportunities within the global financial markets. Recent global financial meltdown has created opportunities to buy companies at incredibly lower prices than anyone can ever imagine. Sun Life does not want to miss out on this.
This deal open up endless possibilities for CI. CI now will be able to use Scotia’s strong distribution channels. There should be increased economies of scale and possibly lower MER for shareholders.
One thing is not clear about this deal – what happens to the special relationship existed between CI and Sun Life? CI has an ongoing distribution agreement with CI. Once Sun Life is no longer the big brother, will there be any motivation for Sun Life to act as a big brother?