A plan by CI Financial Corp. to spin off its U.S. wealth-management represents the next phase of a pivot by management toward stabilization after a spree of acquisitions, according to an analyst who specializes in spinoffs. Shares in the Canadian wealth management firm jumped the most in three weeks on Thursday after the company confirmed its intent to sell up to 20% of the unit through a U.S. initial public offering, with proceeds earmarked to repay debt. The soon-to-be-carved-out company will have $133 billion under management after acquiring more than 30 asset managers since 2020.
Lower organic growth and pressure on fees have been driving asset managers to reduce debt as the company moves forward with its plans to unlock value in the unit, said Jim Osman, chief executive officer at The Edge Consulting Group. “The low-cost, index-based products pressure seems to be increasing on everyone, including CI, and they look to stabilize the business by this move,” he said in an interview. The stabilization maneuver however, doesn’t necessarily mean traders should embrace the shares. “Investors should be cautious about buying these types of IPO when the offering doesn’t have a primary value creative focus,” Osman said.