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Chair Message

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Chair Message  


Fellow Shareholders,

2019 marked the end of an era at GMP. After 25 years of being known as a disruptive investment dealer, we made a bold decision to prepare our Company for the future.


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:

  • sell our capital markets business; 
  • focus capital on the considerable opportunities in the multi-trillion dollar wealth management industry, including the potential consolidation of 100% of Richardson GMP’s ownership under GMP; and 
  • associate ourselves with the Richardson brand to accelerate growth.

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 and 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, our shareholders.

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 proxy circular.

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.

CEO TRANSITION
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.

DIVIDENDS
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.

BOARD RETIREMENTS
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.

LOOKING AHEAD
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.

Sincerely,

Donald A. Wright
Chairman of the Board


DONALD A. WRIGHT
Chairman of the Board

DONALD WRIGHT