Desmarais Family’s Power Looks for More Deals as Cash Piles Up

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(Bloomberg) — Shares of Power Corp. of Canada surged to a record after the company posted strong earnings and said it’s on the hunt for more acquisitions. 

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“The cash position of Power Corp. had quite a material jump over the quarter,” Chief Executive Officer Jeffrey Orr told analysts Thursday. “If there were further opportunities to make acquisitions, that would be capital priority No. 1.” That would include deals to bolster Great-West Lifeco Inc., the firm’s largest holding. 

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Power, controlled by Montreal’s billionaire Desmarais family, said adjusted net asset value was C$72.24 per share at the end of the third quarter, up nearly 20% in nine months. 

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The stock jumped as high as C$71.97 in early trading Thursday, taking its market capitalization above C$45 billion ($32 billion). Historically, Power traded at a significant discount to its stated net asset value — now that has all but disappeared.  

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Investor perceptions of Power have been changed by a series of successful financial services deals. Wealthsimple Financial, an online brokerage that has become one of Canada’s most valuable startups, announced a new fundraising round last month that makes the company worth C$10 billion. Power holds more than 50% through a number of entities.

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About two-thirds of Power’s net asset value comes from its controlling stake in Great-West, which owns Empower Annuity Insurance Co., the second-biggest provider of employee retirement plans in the US after Fidelity Investments.  

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Through its majority ownership in mutual fund manager IGM Financial Inc., Power owns 20.5% of Rockefeller Capital Management, which announced in October a recapitalization at an enterprise value of over $6.6 billion. 

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IGM’s valuation on its Rockefeller stake has increased by 89% to C$1.6 billion since its first investment in 2023.

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“The Wealthsimple and Rockefeller transactions demonstrated not just the quality, but the magnitude of the value-creation that can be created in that part of the portfolio,” said Orr.

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This summer, Robert W. Baird & Co. acquired a 5% stake in Power’s alternative asset management firm Sagard Holdings Inc., becoming its first US institutional shareholder. Sagard and Geneva-based Unigestion also combined their middle-market private equity businesses, leading to a new platform with over $23 billion of private equity assets. But Sagard has yet to be a sustained profitable business: it reported an C$11 million net loss on an adjusted basis in the third quarter. 

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Power reported adjusted earnings per share of C$1.35 during the quarter, a 26% increase from the same period last year and slightly above the average estimate in a Bloomberg survey of analysts.

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The company said it has returned over C$2 billion to shareholders through a combination of share buybacks and dividends so far this year.

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