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Power Corp. announces massive reorganization

By Kate McCaffery | December 13 2019 11:10AM

Power Corporation of Canada and Power Financial Corporation announced today that the companies have come to a definitive agreement to effect a reorganization to simplify the group’s corporate structure “and serve as the foundation and catalyst for a broader set of strategic initiative expected to deliver further value to shareholders.”

The boards of directors at each company have unanimously recommended that minority shareholders vote in favour of the reorganization.

Under the deal, minority shareholders will receive 1.05 Power Corporation subordinate voting shares and $0.01 in cash in exchange for each Power Financial common share. Power Corporation shares reportedly have a net asset value that is $4.50 higher than the net asset value of each Power Financial common share.

Operating cost reduction plan

Further initiatives to benefit shareholders include the implementation of a “significant” near-term operating cost reduction plan, reduced financing costs and an increase in its quarterly dividend by 10 per cent to 44.75 cents per share, starting in the second quarter of 2020.

As part of the announcement, the company also announced that Paul Desmarais, Jr. and André Desmarais will retire as co-CEOs after 23 years in the roles. Both will continue to serve as company chairman and deputy chairman, respectively. Jeffrey Orr, president and CEO of Power Financial will become president and CEO of Power Corporation.

“The reorganization is a natural step that reflects our evolution from a diversified holding company into one that is primarily focused on financial services,” André Desmarais said in a statement released this morning. The company adds that eliminating duplicative public company related expenses and rationalizing other general and administrative expenses should save the company approximately $50-million year, within two years.

Also as part of the announcement, the company today declared a quarterly dividend of 40.5 cents per share, payable March 31, 2020 to shareholders of record February 5, 2020. 

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