Anthony Lacavera, the founder and chairman of Globalive Capital Inc., is leading a bid to acquire Wealth One Bank of Canada, a Toronto-based financial institution that is subject to extraordinary national-security conditions imposed by the federal Finance Minister.
Mr. Lacavera – who is known for founding the wireless carrier Wind Mobile, now known as Freedom Mobile – has raised $51-million for a bid that would see Globalive and a consortium of other investors take a 54-per-cent financial stake in the bank, according to an investor presentation reviewed by The Globe and Mail as well as two sources familiar with the matter. An additional capital injection of $200-million could follow in several years’ time.
The investor consortium includes high-net-worth families in Canada, the U.S. and Britain who have previously invested in the financial sector, as well as Globalive itself, according to one of the sources. The Globe is not identifying the sources because they are not authorized to speak publicly about the bid.
Last year, Finance Minister Chrystia Freeland ordered three of the bank’s founding investors – insurance executive Shenglin Xian, grocery tycoon Yuangsheng Ou Yang and Vancouver property developer Morris Chen – to divest their shares.
The Finance Minister also imposed extraordinary national-security conditions on the bank, requiring it to sever all ties with the three men, who have faced scrutiny from Ottawa over their alleged connections to the Chinese government, and to implement strict anti-money-laundering measures.
The proposal being led by Globalive would see all of Wealth One’s current investors divest their shares and the ownership of the bank move into a special purpose vehicle (SPV), according to the document and one of the sources. An SPV is a legal entity that allows multiple investors to pool their capital and make an investment in a single company.
The deal is structured in such a way that Globalive would be responsible for governance over the SPV, while other investors would be limited partners with only an economic interest in the bank.
That could allow some of Wealth One’s existing shareholders to retain an economic stake and even invest additional funds, subject to government approval, the source said. Only three of the bank’s 10 existing shareholders are covered by the minister’s order, according to the source.
Globalive’s bid appears to have the blessing of Wealth One. The document provided to prospective investors lists both Mr. Lacavera and Wealth One chief executive Paul Leonard as presenters.
Mr. Lacavera declined to comment on the specifics of Globalive’s bid when contacted by The Globe.
“Globalive has long been an innovator and challenger offering Canadians an alternative to the major Canadian telecom companies, and we see a significant long-term opportunity in banking services, building on Wealth One’s record of providing Canadians with innovative, independent banking solutions,” Mr. Lacavera said in a statement.
“We are not in a position to discuss any details of any potential transaction that has not closed,” he added.
The Ministry of Finance declined a request for comment, while the Office of the Superintendent of Financial Institutions said it cannot disclose information about the financial institutions that it oversees. Representatives of Wealth One could not immediately be reached for comment.
Wealth One, which caters to Chinese-Canadian clients, was established in 2016 with an initial investment of $50-million. It is a Schedule 1 bank, which means that it’s permitted to accept and insure deposits and is Canadian-owned, rather than a subsidiary of a foreign bank.
OSFI reviews banking applications and makes recommendations, but the federal Minister of Finance has the final say on granting a licence.
Wealth One has grown substantially since that initial investment. It had more than $600-million in assets at the end of November, 2023, about two thirds of which are uninsured residential mortgage loans, according to the most recent balance-sheet information posted online by OSFI.
However, Wealth One has yet to earn a profit, despite announcing in late 2020 that it had a plan to achieve profitability within a year. The bank lost $9.5-million through the first three quarters of 2023, according to regulatory data. And its assets have declined over the past year, from a peak of $671-million.
The regulatory hurdles facing the bank have limited its ability to raise new capital and grow its balance sheet, according to the investor presentation.
In March, 2023, Canada’s anti-money-laundering watchdog, the Financial Transactions and Reports Analysis Centre of Canada, announced that it had fined Wealth One for failing to abide by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
FinTRAC said the bank’s violations included not filing suspicious-transaction reports “where there were reasonable grounds to suspect that transactions were related to a money-laundering offence.”
Wealth One said at the time that the deficiencies, which were discovered during a routine compliance exam, were related to policies and procedures, record keeping and reporting.
“Any allegation that the bank, or anyone who works here, may be involved in money laundering is completely unfounded,” Mr. Leonard said in a statement at the time.
Ms. Freeland’s restrictions on Wealth One, which rely on powers outlined in the federal Bank Act intended to protect against threats to national security, were put in place in April of last year amid heightened political tensions over Chinese interference in Canadian affairs.
Before issuing the written orders, which instruct the bank to sever all banking relationships with the three shareholders “as soon as reasonably practical,” Ms. Freeland had written to the trio to inform them that they could be susceptible to Chinese government pressure. She also raised concerns that Wealth One may have engaged in money laundering.
The three men resigned as directors shortly after receiving Ms. Freeland’s letter, but have yet to divest their shares.
The Globe previously reported that Wealth One and the three shareholders had been investigated by the Canadian Security Intelligence Service and by officials in the federal Finance Department who deal with national security. The exact substance of these investigations, and the nature of any conclusions they may have reached, are not publicly known.
Mr. Lacavera founded Wind Mobile in 2008 with financial backing from Egyptian billionaire Naguib Sawiris.
The carrier’s launch was delayed when Canada’s telecom regulator, the Canadian Radio-television and Telecommunications Commission, determined that it ran afoul of Canadian ownership rules. The decision was overturned by the federal government before it landed in Federal Court, resulting in a legal saga that was appealed all the way to the Supreme Court, which handed Wind a victory by declining to hear the case.
However, Mr. Sawiris ended up selling the carrier to VimpelCom Ltd., an Amsterdam-based telecom company whose backers included a Russian conglomerate.
After VimpelCom decided not to back Wind’s attempt to buy additional spectrum, Mr. Lacavera wound up recapitalizing the company with funding from Canadian and U.S. private equity investors. In 2016, it was sold for $1.6-billion to Shaw Communications Inc., which renamed it Freedom Mobile.
Globalive recently attempted unsuccessfully to buy back the carrier, which was up for sale as a result of Rogers Communications Inc.’s $20-billion takeover of Shaw.
Canada’s fourth-largest wireless carrier wound up being sold to Quebecor Inc.’s Videotron Ltd. in 2023 for $2.85-billion – $900-million less than Globalive’s unsolicited $3.75-billion offer.
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