National Bank to acquire Canadian Western Bank for $5 billion

CWB CEO expresses confidence in merger bringing value to both banks

National Bank to acquire Canadian Western Bank for $5 billion

The National Bank of Canada has announced an all-share agreement to purchase Canadian Western Bank (CWB) in a deal valued at approximately $5 billion. According to CTV News, this acquisition demonstrates a significant consolidation within Canada’s banking sector and expands the reach of the National Bank of Canada into Alberta and British Columbia.

“This transaction will accelerate National Bank’s strategic plan and pan-Canadian growth,” said Laurent Ferreira, chief executive of National Bank, during a conference call.

The deal follows RBC’s recent $13.5 billion purchase of HSBC Canada, which faced scrutiny for reducing competition in the market. National Bank, currently the sixth-largest bank in Canada, aims to enhance its presence in western Canada and strengthen its national competitiveness through this move.

Merging services with the acquisition\

CWB serves around 65,000 clients through 39 branches, primarily located in British Columbia and Alberta. National Bank has a modest presence in these provinces, with just three branches in each compared to its 280 branches in Quebec. The acquisition will expand National Bank’s lending portfolio outside Quebec by 37%, adding Canadian Western’s $37 billion in commercial loans.

“We will create a stronger full-service, coast-to-coast competitor, providing more choices to individuals, entrepreneurs and businesses across the country,” Ferreira stated. The plan includes integrating National Bank’s full-service offerings and digital capabilities with CWB, as well as expanding wealth management and risk advisory services, areas where CWB has limited offerings.

Chris Fowler, chief executive of CWB, expressed confidence in the merger, saying, “We are proud to come together with National Bank and are confident that this combination will create incredible value for our clients, teams, communities and our shareholders.”

Purchase deal and expected outcome

Under the terms of the deal, each CWB share, excluding those already owned by National Bank, will be exchanged for 0.45 of a National Bank common share. According to CTV News, this exchange values each CWB share at $52.24, a 110% premium to Tuesday’s closing price of $24.89. The total transaction value, excluding shares held by National Bank, is $4.7 billion.

National Bank plans to keep CWB’s headquarters operational and will appoint two CWB nominees to its board of directors. The bank anticipates incurring $400 million in costs to execute the deal but expects to achieve $270 million in annual cost savings within three years. To support the acquisition, National Bank secured a $500 million investment from Quebec’s pension fund, CDPQ, making it the bank’s second-largest shareholder.

The acquisition is subject to customary conditions, regulatory approval, and the consent of two-thirds of CWB shareholders. A meeting to discuss the deal is scheduled for September, with the transaction expected to close by the end of next year.

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