UPDATE 2-Scotiabank to explore sale of CI Financial stake

Wed May 14, 2014 7:51pm EDT
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(Add Scotiabank, analyst comments, CI response, background)

By Cameron French

TORONTO May 14 (Reuters) - Bank of Nova Scotia said on Wednesday it will explore options to divest itself of some or all of its 37 percent stake in asset manager CI Financial and redeploy the capital elsewhere.

The bank, which acquired the CI stake from insurer Sun Life Financial Inc in late 2008, said in a statement it would pursue any divestitures "in one, or a series of transactions."

Scotiabank , Canada's No. 3 bank, estimated the value of the CI stake at C$3.8 billion ($3.5 billion), and offered no assurances that any transaction will be completed. It said the capital associated with the investment will be redeployed to elsewhere in the bank.

Toronto-based CI is a diversified wealth management firm and one of Canada's largest investment fund companies. It operates under banners such as CI Investments, United Financial, Assante Wealth Management and Stonegate Private Counsel and had C$97.3 billion ($89.2 billion) in assets under management as of April 30.

CI, whose shares have risen 64 percent since Scotiabank agreed to buy the stake October 2008, said in a statement it "intends to review its capital structure and dividend policy to ensure that it has the appropriate resources available to respond to any monetization plan Scotiabank seeks to implement."

The question of whether Scotiabank would eventually sell its investment in CI or buy the rest of the company has been a point of discussion among analysts and investors, with many leaning toward the divestment side in the wake of Scotiabank's acquisition of wealth manager DundeeWealth in 2011.

"They don't need CI to be a major wealth manager in Canada. They already have that between their old asset management business and the one they got when they bought Dundee," said Peter Routledge, an analyst at National Bank Financial.   Continued...