Laurentian's B2B to buy AGF Trust, ups dividend

Wed Jun 6, 2012 4:57pm EDT
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By Cameron French

TORONTO (Reuters) - Laurentian Bank of Canada's (LB.TO: Quote) B2B Trust subsidiary will acquire AGF Trust Co from mutual fund company AGF Management (AGFb.TO: Quote) for C$415.5 million ($402.1 million), in a deal the bank said will boost its income and increase efficiencies.

The bank, Canada's eighth-largest, announced the transaction on Wednesday as it reported a stronger-than-expected 9 percent rise in second-quarter net income and raised its quarterly dividend by 4 percent.

AGF's shares rose by as much as 8.7 percent after the deal was announced, before settling back and ending the Toronto session up 4.4 percent at C$12.24. Laurentian climbed 2.7 percent to C$42.35.

"AGF Trust will be beneficial to the bank's performance as it increases our scale of operations and optimizes our efficiency, (and) increases our net interest income and margins," Laurentian Bank Chief Executive Rejean Robitaille said during a conference call.

Laurentian said the deal should add to its net income by about C$28 million to C$30 million annually as of 2014, but will result in a one-time charge of C$30 million to C$35 million.

AGF, Canada's third-largest independent mutual fund company, was hit hard by the 2008 global financial crisis and has struggled to regain its footing, with a lineup of mutual funds that have not performed as well as those of its competitors.

The company said in a statement that selling the trust business would allow it to speed up expansion of its global investment management business.

John Aiken, an analyst at Barclays Capital, said the sale would remove about 20 percent of AGF's earnings power, but the influx of cash increases its ability to make acquisitions and makes its dividend safer.   Continued...