GMP buys private equity firm for C$157.7 mln

Date: Friday, June 16, 2006
Author: Reuters.com

TORONTO, June 16 (Reuters) - Independent investment bank GMP Capital Trust <GMP_u.TO> entered the private-equity market on Friday, purchasing EdgeStone Capital Partners for about C$157.7 million ($140.8 million) in cash and units.

The purchase of what GMP called "one of Canada's leading private equity firms" came just a month after GMP's chief executive, Kevin Sullivan, said in an interview that his firm could pursue such a route.

EdgeStone, with offices in Montreal and Toronto, manages more than C$1.5 billion of private capital on behalf of institutions and wealthy clients. The firm invests in middle-market and early-stage companies and is owned fully by its employees.

GMP said it expects the deal to add to its 2006 earnings.

The two firms have agreed that GMP will not become involved in EdgeStone's investment process and that the private-equity firm will run its own day-to-day operations.

GMP is paying C$62 million in cash and issuing 4.02 million of exchangeable units, which can be converted into regular GMP units, one-for-one. GMP's units were trading at C$23.80 on the Toronto Stock Exchange early on Friday, which would imply consideration of about C$95.7 million at current levels.

The units are being issued under an escrow agreement, and will be released over a three-year period.

In the interview with Reuters last month, Sullivan also said that an acquisition of a hedge fund firm was of interest to GMP as well, as was significantly growing its private-client business.