July 15, 2011 / 12:55 PM / 7 years ago

UPDATE 2-Jovian to sell ETF business to Korea's Mirae for C$90 mln

* Jovian’s interest in Hahn Investment not part of the deal

* Shares touch near 3-year high, then fall (Adds details, analyst comments, share movement)

BANGALORE, July 15 (Reuters) - Jovian Capital Corp said it would sell its nearly 58 percent stake in Canada’s No. 3 exchange-traded funds business, BetaPro Management, to South Korea’s Mirae Asset Global Investments Co Ltd for about C$90 million ($93.9 million).

Jovian shares, which soared 32 percent since the word of the talks were leaked to the South Korean press on July 5, touched a nearly three-year high of C$11.99 earlier on Friday. They later shed some gains to fall more than 4 percent to C$11.00 on the Toronto Stock Exchange.

“When you deal with companies that are in the microcap space that has a very low liquidity in the number of shares transacted on a daily basis, you can have quite a bit of price volatility,” said analyst Fred Westra of Industrial Alliance Securities.

Including additional shares owned by minority shareholders, the enterprise value of the ETF business is about C$150 million, said Jovian, whose largest shareholder is Canadian billionaire Murray Edwards — who has stakes in energy and financial companies and the Calgary Flames National Hockey League team.

“I always felt that this company would probably sell for somewhere in the range of C$120-C$175 million. So, I am quite happy to see them get the C$150 million price tag — it is a good and fair price,” Westra said.

He said Jovian’s other business — such as high networth asset manager Leon Frazer and T.E. Wealth as well as MGI Financial and MGI Securities — could also potentially be sold and fetch nice price tags.

Earlier this month, Jovian had confirmed it was in talks with Mirae Asset Global Management on the ETF stake sale.

Mirae, which is South Korea’s largest mutual fund manager, has a presence across the globe, including Hong Kong, China, Korea, the United Kingdom and the United States.

Mutual fund companies, globally, are looking to diversify into the ETF market, which is still in its early stages but is expected to have strong growth over the next decade.

Canada’s ETF space, which is about two decades old, had about C$40 billion ($41.7 billion) in assets, as of the end of June, according to a recent report by BlackRock .

Royal Bank of Canada , the country’s biggest bank, recently joined the ETF bandwagon. U.S.-based Vanguard, the world’s No. 1 mutual fund manager and a major ETF provider, also announced it was setting up shop in Canada.

There could be a possibility of a better offer, analyst Westra said.

“As the ETF space in Canada becomes more competitive, it makes strategic sense that any of the other big banks that want to get into the ETF business could come up with a better offer and stop Mirae from potentially coming into Canada,” he said.

The deal, which provides for the payment of a break fee in the event the transaction does not close, is expected to close in about 120 days.

BetaPro, which manages Horizons BetaPro and AlphaPro ETFs, specializes in several niches, including direct-commodities linked ETFs, leveraged ETFs and inverse ETFs.

ETFs are investment vehicles that own an array of stocks or bonds, similar to mutual funds, but which are traded on public exchanges.

BetaPro competes in Canada against BlackRock Canada’s iShares ETFs, Claymore ETFs, BMO ETFs , First Asset Management’s XTF Capital, and Invesco PowerShares. ($1 = 0.958 Canadian Dollars) (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Gopakumar Warrier)

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