What's Happening?
First National Financial Corporation has completed a plan of arrangement under the Business Corporations Act of Ontario. The arrangement involved a newly-formed acquisition vehicle controlled by private
equity funds managed by Birch Hill Equity Partners Management Inc. and Brookfield Asset Management acquiring all outstanding common shares of First National, except those owned by the company's founders, Stephen Smith and Moray Tawse. The shares were acquired for $48.00 per share in cash. As a result, Smith and Tawse retain an indirect 19% interest in First National, while Birch Hill and Brookfield hold the remaining 62%. The company's senior unsecured notes were redeemed, and the shares are expected to be delisted from the Toronto Stock Exchange. The company plans to amalgamate with the acquisition vehicle, continuing as First National Financial Corporation.
Why It's Important?
The completion of this arrangement marks a significant shift in the ownership structure of First National Financial Corporation, one of Canada's largest non-bank mortgage originators and underwriters. The involvement of Birch Hill and Brookfield, prominent private equity firms, could bring new strategic directions and financial resources to First National. This change may impact the company's operations and its position in the mortgage market. The delisting of shares from the Toronto Stock Exchange signifies a move towards private ownership, potentially affecting investor access and market dynamics. The continued listing of preferred shares and new notes ensures ongoing financial obligations and opportunities for investors.
What's Next?
Following the completion of the arrangement, First National plans to amalgamate with the acquisition vehicle, maintaining its name and operations. The amalgamation is expected to occur after the settlement of a previously announced offering of $800 million in senior notes. The company will continue to be a reporting issuer under Canadian securities laws, and its preferred shares will remain listed on the Toronto Stock Exchange. The board of directors has been expanded, and further amendments to increase its size are anticipated. Shareholders and noteholders are reminded to submit necessary documentation to receive their consideration.
Beyond the Headlines
The acquisition and subsequent amalgamation could lead to strategic shifts in First National's business model, potentially influencing the mortgage industry in Canada. The involvement of private equity firms may introduce new management practices and investment strategies, impacting the company's growth and competitive positioning. The transition to private ownership might also affect transparency and regulatory compliance, posing challenges and opportunities for stakeholders.
