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Acquisitive AGF Aspires to Global Status

TORONTO - AGF Management of Toronto says it has reversed the foreign takeover trend in Canada with its $296 million deal to buy Global Strategy Holdings, another independent Canadian company, also based in Toronto.

AGF, the ninth-largest firm, was spurned earlier this year when Trimark Financial of Toronto agreed to be merged into AIM Funds Management, the Canadian unit of Amvescap of London. But AGF's acquisition of Global Strategy, expected to be completed by the end of October, will lift it to seventh place in the industry with an estimated $19.5 billion in assets and a 6.9 percent market share.

"This deal marks another exciting step toward realizing our mission to be a global company with a Canadian home," said Blake Goldring, AGF's president and CEO. He spoke to reporters in front of a background illustration of maple leaves, with the red and white Canadian maple leaf flag draped at one side.

"It bolsters our plan to become the Canadian solution in an increasingly competitive and global marketplace," he said.

For Richard Wernham, the president and two-thirds owner of Global, the decision to sell is a surprising turn of events. He said he previously had every intention of continuing to independently build the company that he founded in 1983. In fact, earlier this year, Global was one of the contenders for Strategic Value, fund manager of Toronto, which was acquired in June by Nova Bancorp Group Canada of Montreal.

Though Global Strategy, which is privately-owned, had been in net redemptions over the past year, Wernham said the company is financially strong and was not compelled to merge. But AGF's mostly cash offer, which amounted to 7.3 percent of Global's assets under management, proved to be too good for Global's shareholders to pass up.

Two-thirds to three-quarters of the purchase price will be paid in cash, with the remainder in AGF Class B non-voting shares, which trade on the Toronto Stock Exchange. In addition, there is an asset adjustment payment of up to $8.8 million, based on assets under management at the time of closing.

Global's two other shareholders are N.M. Rothschild Group of London, with a 27 percent stake, and Tom Simpson, executive vice president of Global, who holds about six percent. Rothschild Asset Management will stay on as an exclusive sub-adviser to Global's international funds. Wernham said it is too soon to comment on his personal career plans. But, he said that at 46, he is too young to retire.

Blake Goldring, whose family, including Warren Goldring, the co-founder and chairman of AGF, holds majority control of the company, said the acquisition gives AGF the size needed to establish an "unshakeable foundation" in Canada while expanding its global presence.

Within Canada, the takeover will enable AGF to achieve greater economies of scale, expand its distribution channels and offer a wider range of products, said Goldring. Combined, the two firms will have more than 70 funds, of which about 50 are from the AGF side.

Where there is "clear overlap" between the two fund families, mergers will take place, said Goldring. AGF plans to administer the two fund families with a single computer system, eliminate redundant regional offices and merge marketing operations.

AGF expects to integrate the two fund groups by the end of the year to permit switching privileges. But if that deadline can not be met, the integration will be postponed until after the end of the registered retirement savings plan season, which peaks in the first quarter of the year.

AGF's acquisition reflects a continued trend toward consolidation in the Canadian money management industry. In fact, on the same day that the AGF deal was made public, First International Asset Management, holding company of Toronto, announced it had agreed to acquire Montrusco Bolton of Montreal for $71.6 million. Montrusco, mainly an institutional manager, has total assets under management of $7 billion.

AGF executives believe that its increased size will enable it to compete more effectively for shelf space with other major adviser-sold fund firms because the lion's share of sales is going to a small number of very large firms. They include AIM of Toronto, now the industry's second-largest firm, and Fidelity Investments Canada, also of Toronto, in fourth place.

While wrapping itself in the Canadian flag at its news conference, AGF has its own global aspirations. In early June, it became the first Canadian fund company to open offices in Tokyo and Beijing. It also has offices in Singapore and Dublin.

As part of its Far East expansion, AGF is developing retail mutual funds to be offered to Japanese retail investors. Deregulation in the Japanese market has provided a "terrific opportunity" for fund companies like AGF to leverage their global expertise, Goldring said.

But Goldring, the second-generation head of a company that has been in business since 1957, harbors no ambitions of a southward march into the world's biggest fund market. Even after adding Global Strategy, he said he did not think it was possible for AGF to compete in the U.S.