Security Pacific to Buy 30% of Canadian Firm : Deal Expands Global Securities Network
Security Pacific Corp. said Monday that it has agreed to buy a 30% stake in Burns Fry Corp., one of Canada’s largest securities firms, in a deal that continues the Los Angeles banking firm’s aggressive worldwide expansion in securities and investment banking.
If the deal, valued at $75.8 million under current exchange rates, is approved by regulators, it will give Security Pacific its first major securities presence in Canada. The company, whose principal subsidiary is Security Pacific National Bank, is already involved in the securities business in Asia and Europe through Security Pacific Hoare Govett Holdings, a London-based merchant bank and securities firm 83% owned by Security Pacific.
Toronto-based Burns Fry, the leading dealer in Canadian equity securities worldwide with extensive activities in research, bond trading and mergers and acquisitions, will be integrated into Hoare Govett.
“This is a logical step,” said Dan B. Williams, banking analyst at Sutro & Co., a brokerage based in San Francisco. “This is another piece in their (Security Pacific’s) wide-ranging expansion program.”
Dean Lundell, chief executive of Security Pacific Hoare Govett, said in a statement: “This venture will be a significant step in our strategy of developing a global securities firm with long experience and in-depth knowledge of domestic markets.” Hoare Govett, he noted, has expanded globally by linking with securities firms such as Burns Fry that have expertise in particular countries or markets.
Contrasting Strategies
Ownership of Hoare Govett allows Security Pacific to perform many investment banking and securities operations outside the United States that it is prohibited from doing domestically because of the Glass-Steagall Act, which separates commercial and investment banking.
Security Pacific has said that securities and investment banking are valuable adjuncts to its domestic commercial banking operations, allowing the bank’s institutional customers access to global securities trading and other services.
The deal, analyst Williams said, also is another illustration of the contrasting corporate strategies of Security Pacific and its strongest California rival, Wells Fargo Bank. Instead of focusing on expanding internationally, Wells is concentrating on strengthening its base in the California banking market.
Canadian Laws Eased
Under the deal, Security Pacific Hoare Govett Holdings will pay $100 million (Canadian) for the stake in Burns Fry, which is now wholly owned by its employees. That is equivalent to about $75.8 million at current exchange rates.
Security Pacific said it has an option to increase the stake to 50% after three years and could increase it above that in the future.
In addition, Security Pacific will make available to Burns Fry $100 million (Canadian) in credit.
The transaction, which will require U.S. and Canadian regulatory approval, was made possible by a recent liberalization of Canadian securities law. Until this summer, companies outside the Canadian securities industry were barred from owning more than 10% of a Canadian securities dealer.
But as of June 30, foreigners are allowed to own up to 50% of a Canadian dealer. That will rise to 100% on June 30, 1988.
Separately, Security Pacific announced Monday that it has completed its $1.2-billion acquisition of Seattle’s Rainier Bancorporation.
