Birch Hill Equity Partners and Brookfield Asset Management have agreed to acquire First National Financial in a deal valued at approximately $2.9 billion. The agreement will see all outstanding common shares purchased for $48.00 in cash, while founders Stephen Smith and Moray Tawse retain minority ownership stakes. This move positions two of Canada’s most prominent private equity players at the centre of the country’s largest non-bank mortgage lender.
The transaction includes taking First National’s common shares off the TSX, while its preferred shares remain listed. Leadership continuity is expected, with CEO Jason Ellis and the existing management team staying in place to guide operations. Investors and industry observers are watching closely as the deal advances through shareholder approval and regulatory review.
With Birch Hill and Brookfield’s combined expertise, the acquisition has the potential to reshape dynamics in Canada’s mortgage finance sector. The upcoming sections will explore the structure of the deal, the roles of key stakeholders, and the implications for both shareholders and the broader market.
Birch Hill Equity Partners and Brookfield Asset Management have agreed to acquire First National Financial Corporation in a transaction valued at approximately C$2.9 billion. The deal involves a cash buyout of common shares, a shift in ownership structure, and the planned delisting of the company’s stock from the Toronto Stock Exchange.
Transaction Highlights
First National Financial, one of Canada’s largest non-bank mortgage originators with more than C$155 billion in mortgages under administration, will be acquired by private equity funds managed by Birch Hill Equity Partners Management Inc. and Brookfield Asset Management.
The transaction will be completed through a newly formed acquisition vehicle. Once finalized, First National Financial Corporation’s common shares will be delisted from the TSX, though its preferred shares will remain listed and outstanding.
Management has stated that the company will continue operating under the First National Financial LP name with its headquarters in Toronto. Jason Ellis will remain Chief Executive Officer, and the existing leadership team is expected to continue in place.
The company has also confirmed that it will maintain its regular monthly cash dividend of $0.208334 per common share until the closing date, as well as quarterly dividends on its preferred shares.
Purchase Price and Premium
The buyers will pay $48.00 per common share in cash, valuing the company’s equity at roughly C$2.9 billion. This price represents a premium to the trading value before the announcement, reflecting confidence in First National’s capital-efficient business model and large mortgage portfolio.
Shareholders, excluding founders rolling over part of their holdings, will receive the full cash consideration. The deal requires approval from at least two-thirds of voting shareholders and a majority of minority shareholders, in line with Canadian securities regulations.
Additionally, the company’s Series 3, Series 4, and Series 5 senior unsecured notes will be redeemed at closing. Holders will receive the redemption price plus accrued and unpaid interest. This ensures a clean capital structure transition for the new ownership group.
Ownership Structure Post-Acquisition
Following the transaction, Birch Hill and Brookfield will jointly hold approximately 62% of First National Financial Corporation. The company’s co-founders, Stephen Smith and Moray Tawse, will each retain about 19% ownership after selling two-thirds of their existing common shares.
This arrangement preserves continuity in leadership while shifting majority control to the private equity partners. Smith and Tawse’s ongoing involvement signals stability for employees, customers, and investors.
Preferred shareholders will see no change in their holdings, as these securities remain listed on the Toronto Stock Exchange. The company will also continue to operate as a reporting issuer in Canada’s financial services sector.
More details on the structure and terms of the deal can be found in First National’s official FAQs.
The transaction involves a mix of long-standing founders, current executives, and new private equity owners. Each group plays a distinct role in shaping the company’s direction, ownership structure, and future growth within the Canadian financial services industry.
Stephen Smith and Moray Tawse
Stephen Smith and Moray Tawse, co-founders of First National Financial, remain central figures in the transaction. Both agreed to sell roughly two-thirds of their holdings while retaining a combined indirect minority interest of about 38% through rollover shares.
Smith, through Smith Financial Corporation, will transfer his remaining shares into a limited partnership structure. This move ensures continuity of ownership while aligning his interests with the new private equity stakeholders. Tawse has taken a similar approach, reinforcing their long-term commitment.
Their decision to maintain a significant minority stake signals confidence in the company’s future under new ownership. It also provides assurance to other shareholders that the leadership vision remains tied to the business. The arrangement balances liquidity for the founders with ongoing influence in strategic decisions.
Jason Ellis and the Executive Team
Jason Ellis, the current Chief Executive Officer, will continue leading First National following the acquisition. His ongoing role provides stability at a time of ownership transition, ensuring that day-to-day operations and client relationships remain uninterrupted.
Ellis and the broader executive team oversee more than $150 billion in mortgages under administration. Their expertise in mortgage origination and servicing remains a critical asset for both institutional partners and retail clients.
By retaining the existing leadership, Birch Hill and Brookfield avoid operational disruption. The continuity also reassures employees, lenders, and investors that the company’s established business model will remain intact while still allowing for gradual innovation and expansion.
Birch Hill and Brookfield’s Investment Strategy
Birch Hill Equity Partners and Brookfield Asset Management structured the deal through private equity funds, giving them a combined majority interest of about 62%. The $2.9 billion purchase price reflects their confidence in the scalability of First National’s mortgage platform.
Both firms bring deep experience in operational transformation and capital-efficient growth. Their involvement is expected to enhance First National’s ability to compete in the Canadian financial services industry, particularly in mortgage lending and securitization.
The acquisition also underscores their preference for businesses with stable cash flows and scalable infrastructure. By combining financial backing with industry expertise, Birch Hill and Brookfield aim to support long-term growth while maintaining strong returns for their private equity investors and limited partners.
Deal Structure and Approval Process
The acquisition of First National Financial by Birch Hill Equity Partners and Brookfield Asset Management involves a structured legal and regulatory process. The deal requires a formal arrangement agreement, multiple shareholder approvals, and oversight by the courts, supported by independent fairness opinions and protections against competing bids.
Definitive Arrangement Agreement
The transaction is governed by a definitive arrangement agreement entered into between First National Financial and Regal Bidco, a newly formed acquisition vehicle controlled by Birch Hill and Brookfield. Under this agreement, Regal Bidco will acquire all outstanding common shares of First National for $48.00 per share in cash, representing a total purchase price of approximately $2.9 billion.
The agreement specifies that founders Stephen Smith and Moray Tawse will sell about two-thirds of their holdings while rolling over the remainder into equity of the acquiring entity. This rollover structure ensures continued alignment of interests between the co-founders and the new majority owners.
The arrangement agreement also outlines the treatment of other securities. The company’s preferred shares will remain listed on the TSX, while outstanding senior unsecured notes will be redeemed at closing. These provisions are designed to comply with the Business Corporations Act (Ontario) and applicable securities regulations.
Shareholder and Court Approvals
Completion of the acquisition requires approval from shareholders at a special meeting expected in September 2025. The transaction must receive support from two-thirds of the votes cast. Additionally, under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions, approval from a simple majority of disinterested shareholders is required, excluding Smith, Tawse, and other related parties.
Following shareholder approval, the transaction must be sanctioned by the Ontario Superior Court of Justice under the plan of arrangement provisions of the Business Corporations Act. Court approval ensures that the process is fair, transparent, and compliant with statutory requirements.
The deal also remains subject to clearance under the Competition Act (Canada) and other customary regulatory approvals. Once these conditions are met, closing is expected in the fourth quarter of 2025.
Special Committee and Fairness Opinions
The board of directors of First National established a special committee of independent directors to evaluate the acquisition proposal. The special committee engaged external legal counsel and financial advisors to oversee a market check and ensure that the process maximized value for shareholders.
RBC Capital Markets and BMO Capital Markets served as financial advisors. They provided an independent valuation and delivered fairness opinions concluding that the $48.00 per share cash consideration is fair from a financial perspective to shareholders other than the rollover investors.
The special committee’s role was central in recommending the transaction to the full board. Their evaluation included a review of potential alternatives, the terms of the arrangement agreement, and the protections available to minority shareholders under National Instrument 62-104 – Take-Over Bids and Issuer Bids and the early warning disclosure system on SEDAR+.
Break Fee and Competing Bids
The arrangement agreement includes provisions addressing competing bids. If First National accepts a superior proposal, it must pay a break fee to Birch Hill and Brookfield. This fee compensates the buyers for the time and resources invested in negotiating the transaction.
The agreement also provides for a reverse break fee under certain circumstances, such as a failure by the buyers to obtain regulatory approvals. These reciprocal protections balance the interests of both parties and reinforce deal certainty.
To further secure the transaction, certain shareholders, including Smith and Tawse, entered into voting agreements committing their shares in favour of the deal. These agreements strengthen the likelihood of achieving the required shareholder approval thresholds.
Together, these measures create a framework that allows for a competitive process while ensuring that the agreed terms with Regal Bidco remain enforceable unless a clearly superior offer emerges. This structure reflects market practice in Canadian public company acquisitions and provides clarity for all stakeholders.
For additional details, First National has published a transaction FAQ outlining key terms and next steps.
Implications for Shareholders and the Canadian Mortgage Market
The acquisition introduces immediate liquidity for investors while reshaping competitive dynamics in Canada’s mortgage sector. It also raises questions about dividend stability, the role of non-bank mortgage originators, and how First National’s growth trajectory will evolve under new ownership.
Shareholder Return and Dividends
Shareholders benefit from the $48 per share cash offer, which represents a notable premium to the 90‑day average trading price. This payout provides a clear exit opportunity for those seeking short-term gains. At the same time, retained equity by the founders signals continuity and alignment with future performance.
Dividend policy remains a key consideration. First National has historically paid a monthly cash dividend, a feature valued by income-focused investors. The transaction’s structure suggests that dividend stability will depend on the sponsors’ capital allocation strategy. While quarterly dividends are common in Canadian financial services, maintaining the monthly cadence could differentiate First National under private equity ownership.
Preferred instruments such as Series 1 and Series 2 preferred shares, along with Class A preference shares, may continue to provide fixed-income style returns. The treatment of Series 3, 4, and 5 senior unsecured notes will also matter, as these securities influence leverage ratios and credit ratings. Investors will closely monitor whether Birch Hill and Brookfield prioritise debt reduction or dividend preservation.
Impact on Non-Bank Mortgage Originators
First National has long been Canada’s largest non-bank mortgage originator, with over $155 billion in mortgages under administration. Its scale allows it to compete with major banks while maintaining a capital-light model. This acquisition underscores the growing role of private equity in reshaping the competitive balance of the sector.
Other non-bank mortgage originators face pressure to match First National’s efficiency. Competitors may need to expand into alternative products such as Mortgage Investment Entities (MIEs) or adopt more advanced underwriting tools. The deal could accelerate consolidation, as smaller players may struggle to compete with a firm backed by Brookfield’s global platform and Birch Hill’s operational expertise.
The price-to-earnings multiple of 16.5x attached to the transaction sets a valuation benchmark for the sector. This may raise expectations for future deals, particularly if interest rate stability improves investor confidence in mortgage assets.
Future Outlook for First National
The new ownership group has indicated plans to streamline operations, expand into alternative lending, and explore cross-border opportunities. By leveraging Brookfield’s infrastructure-like investment approach, First National may pursue growth beyond traditional residential mortgages.
Maintaining leadership continuity is central to this outlook. Founders Stephen Smith and Moray Tawse retain a minority stake, ensuring alignment with the private equity sponsors. This continuity helps balance operational changes with customer and institutional partner confidence.
Expansion into the U.S. market and alternative lending segments could diversify revenue streams. However, risks remain tied to Canada’s mortgage renewal wall in 2025–2026, when millions of loans reset at higher rates. Balancing growth with resilience will be critical for sustaining shareholder return and protecting the company’s reputation as a leading mortgage originator in Canadian financial services.
