The process of reviewing strategic options at Laurentian Bank has just taken an intriguing turn. Explanations.
The number of potential suitors is dwindling, as Scotia and TD have decided not to submit a bid for the Montreal financial institution, according to information from the Globe
“It possibly reduces the probability of seeing a sale from Laurentian to less than 50%, but if not, it at least reduces the chances of a higher bid for the bank”, indicates the analyst Joe Ng of Barclays in a research note published Friday.
This expert – like many others – believed that TD, with its financial means, and Scotia, because of its desire to improve its presence in Quebec, were two of the most motivated contenders to want to acquire Laurentienne. .
Portfolio manager Stephen Takacsy of Lester Management said he was surprised to learn that Scotia and TD were pulling out of the process.
These two banks may have other fish to fry, he adds. “I continue to believe that Laurentian will be sold. The question is at what cost. »
If a buyer were to eventually come forward for Laurentian, Joe Ng believes the odds of an offer exceeding book value of approximately $59 per share are dwindling.
Laurentian shares jumped 27% to $43 on the Toronto Stock Exchange on July 12 after the bank’s management announced a review of its strategic options.
The bank’s stock fell 6% on Friday to close the week at $41.05 after news emerged that Scotia and TD had no plans to make a bid.
Meanwhile, investors continue to give Laurentian a valuation well below its book value (about $59 per share). “It suggests that the market is not convinced of the emergence of an offer to buy incorporating an overbidding premium”, argues Joe Ng.
The current situation leads this specialist to wonder what will happen if the sale of Laurentian does not materialize.
He wonders if the effort to explore different strategic options could mean, to some extent, that Laurentian’s management doubts that its current business plan can produce the results that can bring the bank’s value to a level above its book value.
However, there is still interest in Laurentian, according to information obtained Friday by La Presse.
If a transaction is to be carried out with another Canadian bank, it risks being announced at the end of August, when the banking institutions’ quarterly results are released, because the bank managers will certainly be asked questions about Laurentian by analysts while the bank’s management, for its part, will have to take stock of its strategic review process by presenting its results.
If selling is not the only option, clarifying the situation will be important. For the good of its employees, customers and shareholders, Laurentian certainly wants a resolution as quickly as possible in order to avoid fueling uncertainty and speculation.
Laurentian, Scotia and TD declined to comment on Friday.
In addition to the major Canadian banks, the names of iA Financial Group, Desjardins Group and Power Corporation (Wealthsimple) have all surfaced this summer as potential contenders.
Laurentian Bank, whose market capitalization is close to $1.8 billion today, has nearly 3,000 employees and balance sheet assets of $50 billion.
Headquarters: Montreal
Activities: financial services
Year of foundation: 1846
Number of employees: 3000
Balance sheet assets: 50 billion
President and CEO: Rania Llewellyn
