Jarislowsky's Scotiabank Deal Marks End of Era for Founder

(Bloomberg) -- Jarislowsky Fraser Ltd.’s proposed sale to Bank of Nova Scotia marks the end of an era for billionaire founder Stephen Jarislowsky, who built his firm from scratch six decades ago and now holds hefty stakes in some of Canada’s biggest companies.

Scotiabank on Monday agreed to pay about C$950 million ($755 million) for Jarislowsky Fraser, adding more than C$40 billion in assets under management on behalf of institutional investors and high net worth clients.

Jarislowsky's Scotiabank Deal Marks End of Era for Founder

The company traces its roots to the 1950s, when Stephen Jarislowsky, who fled Germany during the Second World War, founded an investment advisory and research firm in Montreal. Now 92, the billionaire investor tangled with Conrad Black and Research In Motion Ltd. over corporate governance and fought to protect Canadian firms from foreign takeovers. With an estimated net worth of C$2.1 billion, he ranks 51st on the list of the 100 richest Canadians compiled by Canadian Business magazine.

Different Time

“Stephen comes from a time when you had to earn people’s trust personally to manage their money,” Michel Nadeau, executive director of the Montreal-based Institute for Governance of Private and Public Organizations, said by telephone. “He managed his clients’ money as if it were his own. This is quite extraordinary, and we’re unlikely to see this replicated in the future,” said Nadeau, a former executive of the Caisse de Depot et Placement du Quebec pension ma, who has known Jarislowsky for more than three decades.

Jarislowsky will “continue his association” with the business that will retain his name and investment autonomy, Scotiabank said in a statement Monday. Led by Pierre Lapointe, who’s been president for about five years, the firm’s current management team will continue to lead the business, and the head office will remain in Montreal, Scotiabank said.

Quyn Pham, a spokeswoman for Jarislowsky Fraser, didn’t return a call seeking comment. Jarislowsky’s assistant referred an interview request with the founder to Pham.

Corporate Canada

Assets of the firm have shrunk from about C$54 billion in 2006, past Bloomberg stories show. Client redemptions and a growing tendency among pension funds to move some of their holdings into “non-traditional” investments such as private equity contributed to the drop in Jarislowsky Fraser’s assets -- as did the 2008 slump in global stock markets, Lapointe told Bloomberg in November 2012.

Three of Jarislowsky Fraser’s five biggest U.S.-listed holdings are Canadian bank stocks, data compiled by Bloomberg show. The stakes in Toronto-Dominion Bank, Royal Bank of Canada and Bank of Nova Scotia have a combined market value of about $3.8 billion. The firm also holds large stakes in Calgary-based energy producers such as Enbridge Inc. and Canadian Natural Resources Ltd., as well as Canadian National Railway Co., the country’s biggest railroad.

Even as he became one of the largest shareholders of these companies, Jarislowsky never lost his personal touch, sometimes writing hand-written notes to clients offering his insights on the markets from his plant-filled office overlooking McGill University in Montreal.

Counterintelligence Officer

Born in Berlin, Jarislowsky emigrated to the U.S. in 1941. He studied engineering at Cornell University and served in the U.S. Army during World War II. After the war, he was posted in Japan as a counterintelligence officer before getting an MBA from Harvard Business School. He moved to Montreal in 1949 to work for Alcan Aluminum Ltd. as an engineer, eventually starting his firm in 1955.

Jarislowsky Fraser began by conducting field research on Canadian companies, developing statistical tools to find and value companies, according to a presentation posted on the firm’s website. Fund managers made more than 100 annual company visits, interviewing executives “and ascertaining the quality and growth prospects of their companies.”

Shareholder Rights

While running the firm, Jarislowsky emerged as one of Canada’s most vocal advocates for better governance. After co-founding the Canadian Coalition for Good Governance with Claude Lamoureux -- the then-CEO of the Ontario Teachers’ Pension Plan -- in 2002, he championed the creation of a national securities regulator and fought to trim CEO compensation at companies such as insurer Manulife Financial Corp. and auto-parts supplier Magna International Inc. He also pushed Canadian banks to separate the posts of chairman and CEO to improve accountability.

As a Southam Inc. director in the 1990s and chairman of the company’s compensation committee, he clashed with Conrad Black over the management fees he was receiving, according to “Robber Baron: Lord Black of Crossharbour,” a 2007 book by author George Tombs on the former newspaper publisher. Jarislowsky later quit the board and sold his stake in Southam, contacting the Ontario Securities Commission about the matter.

Provincial bureaucrats were often the target of Jarislowsky’s ire. In a 2005 interview with Bloomberg, he called Canada’s system of provincial securities commissions “a total waste of the taxpayers’ money.”

Not Shy

Jarislowsky also fought to prevent takeovers of Canadian companies by foreign investors, concerned the sales would give him fewer investment options. He opposed the 2010 sale of Potash Corp. of Saskatchewan Inc. to BHP Billiton Ltd., which was eventually blocked by the Canadian government.

“What benefit does BHP bring to these potash mines? None,” Jarislowsky said at the time. “From the point of view of the country, it’s an enormous negative.”

Jarislowsky hasn’t been shy about wading into the political debate in Quebec either. In a 2011 interview with Montreal’s La Presse newspaper, he called the separatist party “fascist,” driven by a “quasi-religious fervor.”

His views about capitalism were just as strong. In a September 2008 interview with Bloomberg, he declared himself “totally stunned” by the onset of the global financial crisis. “I don’t even think the Thirties were like that,” Jarislowsky said at the time. “At least they had a bank holiday and they closed all the banks. These idiots in Washington didn’t do that.”

Philanthropy Efforts

Jarislowsky, who spent years advising clients to invest in “blue-chip” stocks such as Pfizer Inc. and the oil producer then known as then-Exxon Corp., said even value investors like him need to be patient during a crisis. In September 2008 he said adding equities was the furthest thing from his mind.

“I’m more than worried,” he said. “In a market like this, I’m not looking at opportunity. I am looking at preservation of capital. If governments aren’t careful and this mess isn’t solved fast, capitalism as we know will be wiped out. All real estate, all retail activity will come to a halt.”

In recent years, after stepping down from an active role at the firm, Jarislowsky turned his focus to various charitable and educational activities. “Giving money is more difficult than making it,” he told Canadian Business in a 2003 interview.

According to a November 2017 biography prepared by the Fraser Institute think tank, he endowed more than 23 university chairs. He and his wife also sponsor the chief curator at the Audain Art Museum in Whistler, British Columbia.

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