TORONTO — The Bank of Nova Scotia has inked a mostly-stock deal to buy Montreal’s renowned Jarislowsky Fraser investment firm for $950 million, creating the third-largest active money manager in Canada.The agreement announced Monday gives Scotiabank more than $40 billion in assets under management and comes after the Canadian lender told shareholders at its investor day Feb. 1 that it is interested in acquiring more institutional and private wealth assets to diversify the mix of its wealth business, where its earnings came primarily from retail.Jarislowsky Fraser is an iconic Canadian brand “Jarislowsky Fraser is an iconic Canadian brand with a disciplined investment process, a team-oriented approach with a proven high-calibre investment team, and a long history of delivering outstanding investment capabilities to institutional investors and high net worth families,” Scotiabank chief executive Brian Porter said in a statement.“This transaction aligns with our strategic commitment to diversify our global wealth management business by building out a platform of rigorous, process-driven investment capabilities for institutional investors across our footprint in Canada and the Pacific Alliance.”The deal with Jarislowsky Fraser delivers a respected franchise to Scotia, Canada’s third-biggest lender and “improves its relative positioning and diversification in Canada,” CIBC Capital Markets analyst Robert Sedran said in a note to clients. The manager’s more than $40 billion in assets is comprised of roughly 70 per cent institutional and 30 per cent private wealth, he noted.“Strategically, the acquisition creates the third largest active manager in Canada,” said Sedran. Under the deal, Scotiabank will pay $950 million for the Montreal-based firm, mostly by issuing shares in the bank. An earn-out of up to $56 million in additional Scotiabank common shares may also be paid based on certain growth targets.The management team of Jarislowsky Fraser, which was founded in 1955 as a research boutique, will continue to lead its existing business and its head office will remain in Montreal.Should investors expect another stock market selloff?Everyone is scared and prices are down — and for long-term investors, it’s a beautiful thingThe deal received unanimous support from all partners including founder Stephen Jarislowsky, who will also continue his association with the business that will continue to carry his name and retain investment autonomy, the release said.“With its existing distribution footprint, Scotiabank is uniquely positioned to preserve the legacy of our firm and enable the next generation of growth,” Jarislowsky said in a statement. “We look forward to continuing to serve our clients and to enhancing our investment capabilities to meet their needs today and in the future.”German-born Jarislowsky, one of Canada’s best-known and most outspoken investment managers, retired as chief executive of his namesake firm in 2012 at age 87.The deal is expected to close in the bank’s third quarter this year, subject to regulatory approvals.