IGM, Great-West Dip Into Private Equity With Northleaf Stake

(Bloomberg) -- IGM Financial Inc. and Great-West Lifeco Inc. agreed to buy a non-controlling stake in Northleaf Capital Partners Ltd. for C$245 million ($186 million), giving them access to private equity investments and product offerings.

The purchase will be made through an acquisition vehicle 80% owned by IGM’s Mackenzie mutual-fund unit and 20% owned by Great-West, according to a statement Thursday. The firms, both of which are part of the Power Corp. of Canada group of companies, will get a 49.9% voting interest and 70% economic stake in Northleaf.

The deal will give IGM clients access to private equity investments and allows Great-West to expand alternative investments for its holdings. Northleaf gets a major infusion of capital, with IGM and Great-West agreeing to invest C$700 million in Northleaf’s products in the next 18 to 24 months, in addition to the stake purchase. Toronto-based Northleaf has C$17 billion in private equity, private credit and infrastructure assets under management.

Mackenzie Chief Executive Officer Barry McInerney said the 2008 financial crisis showed that private investments can hold up better than public markets in challenging times, and the plunge in stocks earlier this year added urgency to the firm’s desire offer additional products to its clients.

“We identified this as an opportunity years ago and decided we’ve got try to find a way to get these types of investments into the hands of investors,” McInerney said in an interview.

IGM and Great-West aren’t the first Canadian financial firms to expand beyond their core of stock and fixed-income holdings into private equity. Earlier this year, life and health insurer Sun Life Financial Inc. bought an 80% stake in London-based InfraRed Capital Partners for C$515 million and agreed to co-invest C$530 million to introduce new InfraRed products.

Northleaf focuses on companies with about C$50 million to C$80 million in earnings before interest, taxes, depreciation and amortization, a segment that bigger firms such as BlackRock Inc. and KKR & Co. don’t emphasize. It’s also an area that isn’t available to smaller investors without a deal like the one struck with IGM and Great-West, said Northleaf Managing Partner Stuart Waugh.

“Northleaf is going to get additional scale, additional resources, and we’re also going to get the ability to grow without losing focus on the investment-management side of what we do,” Waugh said in an interview.

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