National Bank to buy Canadian Western Bank in $5-billion deal

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MONTREAL — Canada’s banking sector is facing further consolidation as National Bank of Canada has reached an all-share deal to acquire Canadian Western Bank that values the lender at about $5 billion.

The deal will see Quebec-focused National Bank expand its geographic reach as it takes over Canadian Western’s operations, which are concentrated in Alberta and British Columbia.

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

The deal comes just months after Royal Bank of Canada closed its $13.5-billion acquisition of HSBC Canada, which drew criticism for increasing market concentration as it meant the loss of what was the country’s seventh-largest bank.
National Bank, the sixth largest in Canada, said its acquisition of Canadian Western will significantly expand its western footprint and create a stronger national competitor.

Canadian Western has about 65,000 clients and 39 branches, 30 of which are in B.C. and Alberta, where National Bank currently has only three in each, compared with 280 in Quebec.

The deal also means National will expand its lending portfolio outside of Quebec by 37 per cent as it takes on Canadian Western’s $37 billion in commercial-focused loans.

“We will create a stronger full-service, coast-to-coast competitor, providing more choices to individuals, entrepreneurs and businesses across the country,” Ferreira said.

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National Bank plans to expand its full-service offerings through Canadian Western Bank, including its digital capabilities for all clients, while also offering wealth-management and risk-advisory services, areas where it said there is little overlap with Canadian Western.

“We will work with CWB clients to increase banking services and increase investment in Western communities,” Ferreira said.

Chris Fowler, chief executive of CWB, in a statement said: “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.”

The deal calls for each CWB share, other than those already held by National, to be exchanged for 0.45 of a common share of National Bank. The transaction value is $4.7 billion, excluding shares owned by National Bank.
It said the exchange ratio values each CWB share at $52.24, representing a 110-per-cent premium to Tuesday’s closing price of $24.89.

National Bank said it will maintain Canadian Western’s headquarters and two nominees from the bank will join National’s board of directors.

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It said it expects the costs of carrying out the deal will run about $400 million, while it plans to achieve $270 million in annual cost savings within three years of the acquisition.

To help fund the deal, National Bank secured a $500-million investment from Caisse de dépôt et placement du Québec, making the Quebec pension fund the second-largest shareholder of National Bank.

The acquisition of CWB is subject to certain customary conditions and must be approved by regulators and two-thirds of Canadian Western Bank’s shareholders at a meeting expected to be held in September.

The transaction is expected to close by the end of next year.

The companies say the deal brings together two complementary banks with growing businesses and the combined entity will offer national scale while maintaining a regionally focused service model.

In the deal, each CWB share, other than those already held by National, will be exchanged for 0.45 of a common share of National Bank.

National Bank said the exchange ratio values each CWB share at $52.24, representing a 110 per cent premium to Tuesday’s closing price of $24.89.

The deal is subject to certain customary conditions and must be approved by regulators and two-thirds of Canadian Western Bank’s shareholders.

The transaction is expected to close by the end of next year.

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