Brookfield and Birch Hill Acquire Majority Stake in First National
| 2025-07-30
Brookfield and Birch Hill Acquire Majority Stake in First National
Brookfield and Birch Hill to purchase 62% of First National Financial for $1.8bn, marking a major shift in Canada’s non-bank mortgage sector.
Brookfield-Led Consortium to Acquire Majority Share in Canadian Mortgage Lender
Brookfield Asset Management and Birch Hill Equity Partners have reached an agreement to acquire a controlling interest in First National Financial Corporation, one of Canada’s leading non-bank mortgage lenders. The private equity firms will jointly purchase 62% of the company for approximately CAD $1.8 billion, valuing First National at nearly $2.9 billion.
The acquisition, announced on Monday, offers a premium of 13% above the company’s closing share price on the Toronto Stock Exchange on Friday and about 15% above its 30-day average. The deal allows First National’s founders to monetise a significant portion of their holdings while remaining involved in the business.
Leadership to Remain Following Ownership Shift
Stephen Smith, the 74-year-old co-founder and long-time chairman of First National, currently owns 37.4% of the company. Moray Tawse, the firm’s other co-founder, holds a 34% stake. Following the transaction, both will retain a 19% shareholding and Smith will continue as chairman. Chief Executive Officer Jason Ellis is expected to remain in his role.
"This transaction represents the start of an exciting new chapter for First National," Mr Ellis said in a statement released by the company.
The acquisition follows a strategic review led by RBC Dominion Securities, which drew interest from a wide range of potential suitors. According to sources familiar with the process, Canadian and American private equity firms submitted proposals, though Canada’s major banks—among First National’s primary competitors—were not involved in the bidding.
Expansion in Canada’s Mortgage Sector
First National specialises in residential and commercial mortgages primarily issued to prime borrowers with strong credit profiles. As of 31 March, the company managed $155 billion in mortgage assets, an increase of 7% over the previous year.
The deal further consolidates Stephen Smith’s influence in Canada’s housing finance industry. Beyond First National, he is chairman and co-owner of Fairstone Bank of Canada, a director at Canada Guaranty Mortgage Insurance Company, and the largest individual shareholder in Equitable Bank. He also played a role in Fairstone’s merger with alternative lender Home Trust last year.
Brookfield, a global asset management firm, is already active in the mortgage space through its ownership of Sagen Mortgage Insurance Company. Birch Hill previously held a stake in HomeEquity Bank, a Canadian reverse mortgage provider.
Investor Reaction and Valuation
Shares in First National surged by 13.4% on Monday, closing at $48.15. The purchase price of $48 per share aligns with an independent valuation conducted by BMO Nesbitt Burns, which placed the fair value of the stock between $44 and $50.
Jaeme Gloyn, an analyst at National Bank Financial, described the deal as attractive for shareholders, noting that the competitive bidding process lowers the likelihood of a superior offer emerging. The agreement also includes a break fee of $50 million, payable by First National if the transaction is cancelled.
Mr Smith and Mr Tawse have committed to supporting the deal and opposing any rival bids, according to the terms of the agreement.
Regulatory and Shareholder Approvals Pending
The transaction is subject to approvals by shareholders, a Canadian court, and relevant regulatory authorities. A shareholder vote is scheduled for September, with the deal expected to close in the fourth quarter of 2025.
The move reflects growing interest from private equity investors in Canada’s mortgage sector, particularly as non-bank lenders continue to gain market share amid regulatory pressures on traditional banks. Analysts suggest Brookfield and Birch Hill will seek to enhance operational efficiency and reduce costs at First National, further increasing the company's value.
Context: Private Equity Expands in Canadian Housing Finance
The acquisition marks the latest in a series of private equity investments in Canadian mortgage firms. With housing affordability and mortgage access remaining central issues in Canada’s economy, non-bank lenders like First National have seen sustained demand for their services.
As economic uncertainty and interest rate fluctuations reshape the financial landscape, investors are looking for stable, asset-backed sectors with strong growth prospects. Mortgage lending—especially to high-quality borrowers—offers an attractive mix of risk mitigation and long-term revenue.
With Brookfield and Birch Hill at the helm, First National is expected to continue expanding its reach within Canada’s competitive housing market. The firms’ involvement may also signal broader private sector confidence in the resilience and profitability of the country’s non-bank lending industry.
Brookfield Asset Management and Birch Hill Equity Partners have reached an agreement to acquire a controlling interest in First National Financial Corporation, one of Canada’s leading non-bank mortgage lenders. The private equity firms will jointly purchase 62% of the company for approximately CAD $1.8 billion, valuing First National at nearly $2.9 billion.
The acquisition, announced on Monday, offers a premium of 13% above the company’s closing share price on the Toronto Stock Exchange on Friday and about 15% above its 30-day average. The deal allows First National’s founders to monetise a significant portion of their holdings while remaining involved in the business.
Leadership to Remain Following Ownership Shift
Stephen Smith, the 74-year-old co-founder and long-time chairman of First National, currently owns 37.4% of the company. Moray Tawse, the firm’s other co-founder, holds a 34% stake. Following the transaction, both will retain a 19% shareholding and Smith will continue as chairman. Chief Executive Officer Jason Ellis is expected to remain in his role.
"This transaction represents the start of an exciting new chapter for First National," Mr Ellis said in a statement released by the company.
The acquisition follows a strategic review led by RBC Dominion Securities, which drew interest from a wide range of potential suitors. According to sources familiar with the process, Canadian and American private equity firms submitted proposals, though Canada’s major banks—among First National’s primary competitors—were not involved in the bidding.
Expansion in Canada’s Mortgage Sector
First National specialises in residential and commercial mortgages primarily issued to prime borrowers with strong credit profiles. As of 31 March, the company managed $155 billion in mortgage assets, an increase of 7% over the previous year.
The deal further consolidates Stephen Smith’s influence in Canada’s housing finance industry. Beyond First National, he is chairman and co-owner of Fairstone Bank of Canada, a director at Canada Guaranty Mortgage Insurance Company, and the largest individual shareholder in Equitable Bank. He also played a role in Fairstone’s merger with alternative lender Home Trust last year.
Brookfield, a global asset management firm, is already active in the mortgage space through its ownership of Sagen Mortgage Insurance Company. Birch Hill previously held a stake in HomeEquity Bank, a Canadian reverse mortgage provider.
Investor Reaction and Valuation
Shares in First National surged by 13.4% on Monday, closing at $48.15. The purchase price of $48 per share aligns with an independent valuation conducted by BMO Nesbitt Burns, which placed the fair value of the stock between $44 and $50.
Jaeme Gloyn, an analyst at National Bank Financial, described the deal as attractive for shareholders, noting that the competitive bidding process lowers the likelihood of a superior offer emerging. The agreement also includes a break fee of $50 million, payable by First National if the transaction is cancelled.
Mr Smith and Mr Tawse have committed to supporting the deal and opposing any rival bids, according to the terms of the agreement.
Regulatory and Shareholder Approvals Pending
The transaction is subject to approvals by shareholders, a Canadian court, and relevant regulatory authorities. A shareholder vote is scheduled for September, with the deal expected to close in the fourth quarter of 2025.
The move reflects growing interest from private equity investors in Canada’s mortgage sector, particularly as non-bank lenders continue to gain market share amid regulatory pressures on traditional banks. Analysts suggest Brookfield and Birch Hill will seek to enhance operational efficiency and reduce costs at First National, further increasing the company's value.
Context: Private Equity Expands in Canadian Housing Finance
The acquisition marks the latest in a series of private equity investments in Canadian mortgage firms. With housing affordability and mortgage access remaining central issues in Canada’s economy, non-bank lenders like First National have seen sustained demand for their services.
As economic uncertainty and interest rate fluctuations reshape the financial landscape, investors are looking for stable, asset-backed sectors with strong growth prospects. Mortgage lending—especially to high-quality borrowers—offers an attractive mix of risk mitigation and long-term revenue.
With Brookfield and Birch Hill at the helm, First National is expected to continue expanding its reach within Canada’s competitive housing market. The firms’ involvement may also signal broader private sector confidence in the resilience and profitability of the country’s non-bank lending industry.
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