First Chicago, Wood Gundy Scrap Accord : Questions Raised About Canadian Firm’s Health
First Chicago Corp. and Wood Gundy Inc. said Monday that they ended their agreement to form a partnership amid questions about the health of the Canadian investment firm following the October stock market crash.
First Chicago said its First National Bank of Chicago subsidiary ended by mutual agreement a $205-million deal signed last June to buy a 35% interest in Wood Gundy, one of Canada’s largest securities firms.
But Toronto-based Wood Gundy said it still plans to create a partnership of some kind and is talking with several major Canadian and international institutions.
“We concluded that it just wasn’t possible to proceed in a practical manner with a First Chicago affiliation,” Wood Gundy Vice Chairman Ed King said.
A spokesman for First Chicago refused to specify whether it would seek to link up with another securities firm.
King refused to disclose the points that blocked completion of the deal, but First Chicago had expressed reservations about the partnership soon after the market crash, which dealt severe blows to the stock of many securities firms.
Announcement Next Year
King said Wood Gundy has been approached by more than 20 institutions seeking a partnership since First Chicago said it was reassessing the deal. He refused to name the suitors but said that the firm was not ruling out transactions that would transfer a majority stake in the firm.
Wood Gundy Chairman Ted Medland said an announcement of a new alliance will be made in the first quarter of next year. “It continues to be our objective to form a strategic linkage where our strengths combined with those of our new partner will produce significant benefits for our clients,” he said.
The First Chicago deal was announced shortly after the Canadian government deregulated the financial services industry in June, a move that allowed banks, trust companies, foreign firms and other financial institutions to enter the securities business.
But the bank said as early as Oct. 29, just 10 days after the stock market crash, that it was reassessing the deal because of the British government’s decision to go ahead with its issue of British Petroleum Co. shares and its effect on Wood Gundy.
