Jovian sells MGI Financial to Desjardins

Jovian Capital has announced a deal to sell its mutual fund dealer subsidiary MGI Financial Inc. to Desjardins Financial Security, for about $27 million.

The deal is expected to close on or about September 30, 2011, subject to regulatory and contractual consents and approvals. The transaction includes MGIF’s various subsidiaries, including its 50% stake in MGI Insurance Brokerage.

The deal does not include Jovian’s IIROC platform, MGI Securities.

“We believe this transaction is a good fit for both parties,” said Dave Velanoff, CEO of MGI Financial. “Desjardins is a major financial institution with a growing national reach. With their support, MGI Financial will have the opportunity to continue its growth, while providing Desjardins with an expanded presence in western Canada.”

He says Desjardins is very supportive of the independent network, and that it will not likely move MGI advisors toward a bank-like model. Its also probably the last time advisors will have to change their letterhead.

“I’ve been a big advocate of being extremely well-capitalized in this business, and Desjardins is the sixth largest financial institution in Canada,” he points out. “It’s not publicly traded, which I think is to the advisors’ advantage. I don’t know who could buy them. Its very difficult to buy an organization like this, if not impossible.”

Denis Berthiaume, senior vice-president, wealth management and life and health insurance of Desjardins Group and chief operating officer of Desjardins Financial Security, was equally enthusiastic.

“By joining forces with [MGI], we will be able to continue our successful expansion strategy throughout Canada. We’re also looking forward to working closely with MGI Financial’s management team.”

Assuming the deal closes, MGI advisors will probably be relieved to know that Desjardins operates on the Univeris platform already, so there a technological shift is unlikely.

Desjardins already has about 1,400 financial advisors, split fairly evenly between Quebec and the rest of Canada. The MGI acquisition would add another 200.

Jovian has been shedding its mature assets lately, selling off its ETF business to South Korea’s Mirae Asset Global Investments in mid-July. CEO Philip Armstrong says the plan is to “focus on our strategic businesses”.

“Along with the recently announced sale of the Horizon ETFs business, this transaction will also provide us with the resources to continue to invest in growing the enterprise value of our current investee companies, while also seeking new opportunities to create value for our shareholders,” he said in today’s announcement.

The company’s stated mission is to “acquire, create and grow financial services companies specializing in three primary market segments: wealth management, traditional asset managers, and exchange traded fund asset managers.”

“Our mantra is to build enterprise value on behalf of our shareholders and at the right time and right place, look for opportunities to crystallize on the value we’ve created,” says Mark Arthur, president of Jovian. “It just so happened that these two transactions ended up being close together.”

While the MGI sale was in the works well before the recent market volatility, Arthur says the current environment could present opportunities, and that it is always helpful to have cash available.

“We have opportunities to make further investments in the companies that we own in order to help them grow, and we remain on the look-out for additional opportunities to grow our value for our shareholders.”

The Jovian group of companies still includes MGI Securities Inc., MGI Securities (USA) Inc. and T.E. Wealth, Leon Frazer & Associates and Hahn Investment Stewards & Company.