CI Financial had announced in April its intention to sell 20% of its US wealth management business through an IPO, and the company is considering increasing that share.

“While the Canadian and US operations will initially be consolidated for accounting purposes, we will think of and manage them as separate entities,” MacAlpine said.

The Canadian business, which owns shares in the US business, will retain all of CI Financial’s existing debt, including deferred guaranteed acquisition payments. Proceeds from the IPO should be used for deleveraging.

“Launching our debt-free U.S. business provides us with a unique strategic advantage and maximizes our ability to continue to leverage our growth, scale and leading margin,” MacAlpine said on the conference call.

Following the U.S. IPO, CI expects the Canadian company to not fund any future U.S. acquisitions or pursue major M&A opportunities in Canada. (CI Financial is also listed on the Toronto Stock Exchange.)

MacAlpine said the company would use cash flow generated from the Canadian asset and wealth management business to deleverage and “effectively take our business private” through continued share buybacks.

James Shanahan, an analyst at Edward Jones, said that since the start of 2020, CI Financial has invested about $1.8 billion to grow its wealth segment in the United States, which has led to an increase in the outstanding amount of debt from $2.3 billion to nearly $4.0 billion.

“CI shares underperformed their Canadian financials peers, which we attribute to management changes, strategic uncertainty and rising debt,” Shanahan said in a research note.

CI Financial will also migrate $14 billion in client assets with its Aligned Capital subsidiary to its custodial platform, CI Investment Services, in the second quarter of 2023. The company says it has allocated resources to develop the internal custody platform over the past two years.

Migrating client assets to CI Investment Services “enables a better service experience for Aligned Capital Advisors in addition to attractive economics in the current interest rate environment,” MacAlpine said. “We expect the integration to generate at least $10 million in additional annual EBITDA.”

The company also plans to migrate Assante Wealth Management to in-house custody and offer these services to third parties in 2024.

In October (following the end of the third quarter), CI Financial completed two acquisitions: Eaton Vance Investment Counsel and Inverness Counsel, adding combined assets of C$18 billion to clients. Inverness Counsel has been renamed CI Inverness Private Wealth.

CI Financial’s adjusted net income for the third quarter was $135.9 million, down from $149.1 million in the prior quarter and $159.2 million from the same period last year. last year.

The company’s total assets under management (AUM) across its asset and wealth management businesses were $338.0 billion at the end of the third quarter, down from $333.7 billion at the end of the third quarter. from the previous quarter and $313.2 billion at the end of the third quarter of last year.

Canadian wealth management assets were $74.0 billion at the end of the third quarter, down from $74.1 billion at the end of the previous quarter and $76.9 billion at the end of the third quarter of last year.

Asset management net inflows were $75 million in the third quarter, compared with an outflow of $4.1 billion in the previous quarter and an inflow of $821 million in the third quarter of last year.