Canaccord Financial has signed a definitive agreement to acquire Genuity Capital Markets, creating a full-service independent investment bank.

The companies say the transaction combines equity underwriting strength with advisory and restructuring leadership and consolidates research into one global platform.

The combined capital markets operations in Canada, the US and the UK will be renamed Canaccord Genuity on closing.

"Canaccord's acquisition of Genuity more than satisfies our stated acquisition criteria: the Genuity partners are an excellent strategic and cultural fit with our business, and this transaction is immediately accretive to shareholders, increasing Canaccord's trailing 12-month EPS on a pro-forma basis by more than 15 per cent," says Paul Reynolds (pictured), president and chief executive of Canaccord. "Canaccord and Genuity have each built strong independent businesses, and we have enormous respect for each others' accomplishments as well as a shared vision of how best to serve our clients."

Genuity is an independent advisory and restructuring firm in Canada. Founded in 2005, the firm has been involved in over 106 advisory assignments, with an average transaction size of USD392m since 2007. Genuity has 135 employees and offices in Toronto, Vancouver, Montreal, Calgary, Boston and New York.

"We are excited to join Canaccord's strong global platform," says David Kassie, chairman and chief executive of Genuity. "Like Canaccord, Genuity is a producer owned and driven business. Our firms share a deep commitment to creating long-term value for our clients and shareholders, and I look forward to our combination and continued success."

The definitive agreement provides that Canaccord will acquire 100 per cent of Genuity for consideration consisting of 26.5 million Canaccord common shares and cash of USD30m. In addition, the vendors will receive up to USD28m as a working capital adjustment subsequent to closing. Based on the closing price of Canaccord's common shares on 4 March 2010 of USD8.60, this values Genuity at approximately USD285.9m. It is expected that this transaction will be immediately and significantly accretive to Canaccord's earnings.

All of the Canaccord common shares issued as part of the purchase price will be placed in escrow at closing and released ratably over five years. Genuity's ten largest partners have entered into employment agreements that will become effective on closing, and on closing will also enter into non-competition, non-solicitation and standstill agreements. All of the other Genuity partners are expected to become Canaccord Genuity employees on closing.

Upon closing, Canaccord will appoint two nominees of the existing Genuity partnership - Kassie and Philip Evershed - to its board of directors. Kassie will serve as Canaccord's group chairman while Peter Brown will serve as chairman and founder.