Our past was an entrepreneurial capital markets business that
was capital intensive and focused primarily on niche sectors of the
Canadian economy. It was called GMP Securities. This iconic brand
had been a strong performer for more than fifteen years generating
strong returns for shareholders but then endured a near decade-long
risk-off trade, disintermediation and countless structural challenges.
With a falling share price reflecting the concern and uncertainty
investors felt about our future, we knew the status quo was no longer
the best option. Let me assure you that we did not arrive at this
decision lightly. GMP Securities had many great years but its outlook
as a small independent dealer was less promising. We needed to act,
and that is precisely what we did.
Last year, after the culmination of a multi-year comprehensive review
of our long-term strategy, the Board made the decision to:
Richardson GMP is one of Canada’s leading wealth management
firms serving high net worth Canadians. At the end of 2019, each
of GMP and Richardson Financial Group (“RFGL”), our largest
shareholder, owned approximately 34.4% of that business. The
balance is held by investment advisors, management, employees
and others at Richardson GMP. That business is at scale, less capital
intensive, national in scope, consistently profitable with strong
recurring revenues. It has some of the best investment professionals
in the industry, a strong management team, an award-winning brand
and offers the potential for significant growth opportunities in the
multi-trillion-dollar wealth management industry in Canada.
With a 98.4% favourable vote from shareholders to sell our capital
markets business, we successfully sold the business to Stifel
Nicolaus Canada Inc. (Stifel) in December 2019.
The sale of capital markets freed up significant capital to devote to
other opportunities, including in the wealth management industry.
It also allowed us to return to shareholders a significant portion of
the $42.2 million cash proceeds from the sale. In December, we
returned $21 million to shareholders as a return of capital, and when
combined with $12 million in preferred and common dividends, we
returned $33 million to shareholders in 2019.
Then, this past February, based on the unanimous recommendation
of an independent Special Committee (which did not include
representatives of RFGL, we announced a non-binding agreement
between GMP and RFGL to consolidate 100% ownership of
Richardson GMP under GMP (the “Initial RGMP Transaction”).
For this purpose, the Special Committee had retained RBC Capital
Markets to complete a formal valuation of both Richardson GMP
In March, the severity and uncertain duration of the COVID-19
outbreak resulted in us deferring the Initial RGMP Transaction.
On August 13, 2020, after considering the impact of market
conditions on Richardson GMP and GMP and receiving an updated
formal valuation and fairness opinion from RBC Capital Markets and
based on the unanimous approval by the Board (excluding conflicted
directors), we announced a definitive purchase agreement with RFGL
to consolidate 100% ownership of RGMP under GMP (the “RGMP
Transaction”). Pursuant to the RGMP Transaction, GMP will acquire
all of the common shares of Richardson GMP that are not owned
by the Company for a purchase price of 1.875 common shares per
common share of RGMP.
We also announced as part of the RGMP Transaction, the payment
of a special dividend of 15 cents per common share to pre-closing
GMP shareholders. The revised terms to the previously announced
transaction in February 2020 strike what, we believe, is an appropriate
balance taking into account the effects of the global pandemic,
feedback raised by various stakeholders and retaining the appropriate
level of capital to execute our long-term value creation strategy.
Furthermore, we were able to secure the commitment of RFGL to
not have their preferred shares in Richardson GMP redeemed
on closing as otherwise required under the RGMP Shareholders
Agreement, and instead leaving the $32.1 million in the Company to
fund growth opportunities. This announcement represents another
significant milestone in our journey to create long-term value for you,
You will have the opportunity to vote on the RGMP Transaction at
our upcoming annual and special meeting of shareholders, on
October 6, 2020. We encourage you to review the related management
The following table provides a summary of the key revised August
terms compared with the non-binding terms announced in February.
Furthermore, the payment of a 15 cent special dividend of
$11.3 million when combined with the $21 million return of capital
last December, represents approximately 76% of the aggregate
proceeds received from the sale of our capital markets business.
In August 2019, at a critical time in our history, we appointed
Kish Kapoor as Interim President and Chief Executive Officer of
GMP. His mandate was to complete the sale of the capital markets
business and prepare the Company for the next phase of its growth.
Kish brings considerable senior leadership experience and business
acumen in wealth management, asset management and capital
markets over a career that spans more than 40 years.
While he is new to the role, Kish is not new to the firm. He sits on
the boards of GMP, Richardson GMP and RFGL. Given his deep
knowledge, he is uniquely positioned to chart a path forward that
best meets the interests of all stakeholders.
On April 29, 2020, out of an abundance of caution and conservative
approach to capital management, amid disruption caused by
COVID-19, the Board decided to temporarily suspend quarterly
common share dividends.
In April 2020, Gene McBurney and Fiona Macdonald retired
from the Company’s Board of Directors, and in February 2020,
Kevin Sullivan retired from the Board. Gene and Kevin were two
of the founders of GMP Securities L.P. in 1995. Fiona joined the
Board in 2013.
We thank Gene, Kevin and Fiona for their leadership, strategic
guidance and informed insights and we wish them all the
very best in their future endeavours.
Our top priority in 2019 was to accelerate our transformation, and we
did just that. In 2020, our top priority is to safely navigate through the
challenges brought about by the global pandemic and complete the
RGMP Transaction. We are confident that the course we charted some
time ago to transform GMP will lead to success for us all.
To our shareholders, thank you for your ongoing support through
this time of transition. To my fellow Board members, thank you
for your insight, sound judgement and courage to embark on this
transformational journey on behalf of all of our stakeholders. Finally,
a special thanks to our leadership team and employees who have
worked tirelessly to prepare us for where we are going in the future.
Donald A. Wright
Chairman of the Board
DONALD A. WRIGHT
Chairman of the Board