Canaccord Financial has snapped up British broker and advisory group Collins Stewart Hawkpoint for just over 253 million pounds, cementing the Canadian investment dealer's ambitions of expanding in London amid a wave of consolidation in the troubled sector.

Shares of Collins Stewart shot up 75.3 percent to 88.3 pence on Thursday, within reach of the 96 pence per share offer, while Canaccord's shares fell as much as 14 percent to touch a year low as investors fretted about the risks associated with the move.

The cash and stock offer represents a more than 90 percent premium on Collin's Stewart's Wednesday closing price, but analyst Peter Lenardos of RBC Capital Markets called it a full and fair price.

Furthermore I see little chance of a counterbidder because most of the candidates are busy with other things. If someone does emerge it would have to be someone beyond the obvious suspects, he added.

The deal will give Canaccord, which has a strong presence in Canada's mining sector, a greater presence in the United Kingdom, which is also a mining finance hub. It will also boost the profile of the investment dealer and wealth in the United States and give it a presence in Singapore.

We expect the addition ... will provide a high quality fee-based revenue stream to our business, while our expanded capital markets capabilities we gain from the acquisition will position us very well for the eventual market recovery, Canaccord Chief Executive Paul Reynolds said on a conference call.

On a pro-forma basis, the combined companies would have revenue of C$1.1 billion ($1.06 billion)in the 12 months ended June 30, Reynolds said. In the 2011 fiscal year, which ends March 31 for Canaccord, revenue was C$803.6 million.

The deal is expected to add modestly to earnings, even before factoring in expected cost savings, although one analyst said current market conditions clouded the issue.

Given the significant size of the acquisition and volatile capital markets conditions, we think investors will likely be sceptical of accretion estimates, Phil Hardie, an analyst at Scotia Capital, said in a research note.

By mid-afternoon, Canaccord shares had rebounded from their lows and were down 55 Canadian cents, or 6.5 percent, at C$7.95.


Canaccord has been circling British brokers for some time, and was one of the parties looking at investment bank and brokerage Evolution earlier this year. In the end, South Africa's Investec snapped up that firm.

A wave of consolidation has hit the brokerage sector after the euro zone debt crisis gutted incomes.

Many, including Evolution, have been cutting jobs and seeking out partners as trading margins get squeezed. Others, such as Panmure Gordon
, have warned they will post a loss this year.

Canaccord has been on the acquisitions trail for several years, looking to bolster its investment banking business.

In 2010, it bought rival Genuity Capital Markets, a privately held firm specialising in corporate advisory, such as on mergers and acquisition deals.

But a bigger presence in London had so far eluded it. As a result of the deal, Canaccord, which is currently listed in Toronto and on London's smaller AIM market, will apply to list on the main market of the London Stock Exchange.

Collins Stewart specialises in stockbroking, research and fixed income credit trading, but also corporate finance advisory through Hawkpoint - a firm it bought five years ago but had only recently integrated into its name.

Hawkpoint was also the firm advising Collins Stewart on this deal, along with Nomura.

Shareholders will be offered 57.6 pence in cash and 0.072607 Canaccord shares for each Collins Stewart share, Canaccord said.

(Reporting by Clara Ferreira-Marques and Sarah White in London, and Cameron French in Toronto; Additional reporting by Luke Jeffs; Editing by Douwe Miedema, Elaine Hardcastle and Rob Wilson)