The National Bank intends to expand its activities in the country by making the largest acquisition in its history, that of the Canadian Western Bank.
From its English name Canadian Western Bank, this financial institution established in Edmonton, Alberta, has an approximate market capitalization of two billion dollars.
The transaction would be accomplished through a share swap valuing Canadian Western Bank at approximately $5 billion.
The exchange ratio used values each Canadian Western Bank share at $52.24, the equivalent of a 110% premium to the stock’s closing price of $24.89. Tuesday.
Unlike the National Bank, the Canadian Western Bank is not popular with investors this year. Its stock is down 20% since the start of the year on the Toronto Stock Exchange.
In a conference call after the markets closed, the CEO of the National Bank, Laurent Ferreira, underlined that the operation brings together two complementary banks whose activities are growing.
The transaction is subject to the approval of 66 2/3% of the votes cast by Canadian Western Bank shareholders at a meeting expected to take place in September.
To finance the acquisition, National Bank arranged an equity financing of approximately $1 billion.
The Caisse de dépôt et placement du Québec will purchase 4.4 million securities at a unit price of $112.30 to provide $500 million, which will raise Quebec’s largest institutional investor to second place among the most important shareholders of the National Bank.
National Bank also intends to issue 4.4 million securities at a price of $112.30 to underwriters for total gross proceeds of approximately $500 million.
The Canadian Western Bank has a primarily commercial vocation and, like the National Bank, is very active with entrepreneurs and SMEs.
The expertise of the Canadian Western Bank in equipment financing, for example, is one of the elements that the National Bank will undoubtedly want to import to Quebec.
The transaction can be seen as a vote of confidence in the future of the economy of western Canada, a place where National Bank is present with a financing offer for Alberta companies in the energy sector in particular.
The project is described as a “transformative acquisition” for the National Bank by Vincent Delisle, head of liquid markets at the Caisse. “This will allow it to execute a new part of its expansion plan,” he says.
The last significant transaction for 100% of an entity by National Bank dates back to 2013 when it acquired TD Institutional Services (Waterhouse).
National Bank shares reached a historic high last week on the Toronto Stock Exchange. Up 15% so far in 2024, the stock closed Tuesday’s session at $116.34.
The bank announced at the end of May an increase in the dividend paid to its shareholders and profits of 906 million for the months of February, March and April, up 9% year-on-year.