Canada’s rise attractive to investment firm Jefferies

Canada is on the rise, which is why global investment banking and capital markets firm Jefferies recently established a full-service presence in the country. 

It’s a place where Jefferies Financial Group (NYSE:JEF) sees immense opportunity to help its clients grow, scale, and acquire what it says are world-class assets.

John Manley, Chairman of Jefferies Canada and a lawyer, businessman, and former Prime Minister, says in the years since the pandemic, even though the Bank of Canada said the economy stalled since mid-2023, fiscal policy remains supportive, with plenty of forces aligning to spur growth in the years ahead.

Manley says historically, the Canadian economy has been more akin to Australia than the US because it has such a strong base in natural resources. 

“Energy and financial services alone account for almost half the value of the Toronto Stock Exchange (TSX). But on a relative basis, the share of energy and financial services is shrinking. Materials and industrials are expanding,” Manley says.

“Technology has almost doubled its presence in the TSX, and the third most valuable company in all of Canada is Shopify, an ecommerce retailer. So the economy is becoming more diversified and many of our leading companies are in a position to both sell more into the US and to attract more capital from all over the world. 

“That said, I still believe that Canada’s family business is the extraction and processing of our immense natural resources. Demand for energy and minerals, as well as the output from our agricultural, forestry and fishery industries are strong and growing.”

Global strategic alliance 

In April 2024, Jefferies and SMBC Group expanded their global strategic alliance and collaboration on future corporate and investment banking business opportunities within the Canadian market. 

It followed a December 2023 decision by Jefferies to establish full-service investment banking and capital markets capabilities in Canada, opening a new 40-plus person office with dedicated expertise across investment banking, equity research, and sales and trading in all sectors. 

SMBC Group comprises Sumitomo Mitsui Financial Group (NYSE:SMFG), Sumitomo Mitsui Banking Corporation (SMBC), SMBC Nikko Securities America, SMBC Nikko Securities Canada, and other group companies.

Jefferies now aligns its industry, M&A, leveraged finance, and equity capital markets knowledge in Canada with SMBC Group’s deep banking and debt capital markets expertise and strong balance sheet to support and serve clients.

CEO of Jefferies Canada Bruce Rothney says in the first few months following opening the Canada office, the firm witnessed immediate benefits of the Jefferies-SMBC accord. 

The SMBC-Jefferies strategic alliance started in 2021 and is focused on US leveraged finance and Japan crossborder M&A. In support of this initial strategic alliance, SMBC provided US$2.25 billion in financing to Jefferies and purchased roughly 4.5% of the outstanding common shares of the firm. 

The alliance was expanded in the US in 2023 to broaden the scope of collaboration in deal advisory services, increase collaboration across the firms’ equities and debt capital markets businesses, and launch a joint coverage model for designated investment grade clients. 

In April 2023, the partnership was further bolstered when SMBC announced it will raise its economic ownership to up to 15% on an as-converted and fully diluted basis, which would result in SMBC becoming Jefferies’ largest shareholder.

Then in January 2024, the alliance further extended to cover Europe, the Middle East and Africa (EMEA).

SMBC Canada General Manager Takeshi Okamoto says adding another region to the strategic alliance with Jefferies builds on its initial success as global partners. 

The International Monetary Fund in 2024 already flagged Canada to be the world’s third fastest growing economy. That growth as been coming from a more diverse mix of industries than ever before, according to Manley.

“Canada has everything the world needs”

“Canada has everything the world needs,” Chairman of Jefferies Canada adds.

“We have energy, water, agricultural, and mineral resources, and so much else. We have an educated population and high standard of living that supports a vibrant consumer market. 

“So this is a growing and diverse economy and whatever the sector, Jefferies has someone with expertise who can help our clients find opportunities in them.”

Manley says that all Canada lacks is scale, which access to US markets can help provide. Enabling its clients to benefit from their proximity to that massive neighbouring market is at the top of his list of objectives for Jefferies Canada in the short-term, he adds.

Write to Adam Orlando at Mining.com.au

Images: Saxo & IMF (Wikipedia)