Brookfield and Birch Hill are jointly acquiring a 62-per-cent stake in First National for $48.00 per share in cash.Mark Blinch/Reuters
The mortgage company backed by billionaire Canadian financier Stephen Smith, First National Financial Corp. (FN-T), is being acquired by private equity buyers Brookfield Asset Management Ltd. (BAM-T) and Birch Hill Equity Partners Management Inc.
Brookfield and Birch Hill are jointly acquiring a 62-per-cent stake in First National for $48.00 per share in cash. That is a 15-per-cent premium to First National’s average share price over the past 30 days and gives the company a total equity value of $2.9-billion.
First National’s founders, Mr. Smith and Moray Tawse, as well as their associates, are selling about two thirds of their existing ownership in First National – currently 37.4 and 34 per cent respectively.
After the deal closes, Mr. Smith and Mr. Tawse will each own about 19 per cent of the company.
First National is one of the leading competitors to Canada’s major banks in the mortgage market, issuing mostly prime mortgages – those made to borrowers with strong credit and income.
“We believe the transaction represents an attractive valuation for First National shareholders,” said Jaeme Gloyn, an analyst at National Bank Financial Inc., in a note to clients.
First National said the deal came after a strategic review process that was led by RBC Dominion Securities Inc., “which included outreach to a broad pool of potential buyers and resulted in multiple acquisition proposals,” in a news release.
Mr. Gloyn said in National Bank’s view, “this reduces the likelihood of a superior bid emerging.”
A special committee of independent directors obtained opinions from BMO Nesbitt Burns Inc. that the value of First National shares was between $44 and $48, and that the transaction is fair.
First National chief executive officer Jason Ellis is expected to stay on and lead the business, according to the statement.
The deal is expected to close in the fourth quarter this year, subject to approvals by shareholders, a court and regulators. The company plans to hold a shareholder vote in September.