National Bank of Canada to Acquire Canadian Western Bank in C$5 Billion Deal — Update

By Ben Glickman and Paul Vieira

National Bank of Canada agreed to acquire Canadian Western Bank in a share-swap deal valued at about 5 billion Canadian dollars ($3.63 billion), aided by a sizable investment from one of North America's biggest pension funds.

The transaction, pending regulatory approval, would give Montreal-based National Bank -- the smallest of Canada's so-called Big Six chartered banks -- a broader foothold in western Canada, which is the center of the country's energy and mining sector. The Caisse de dépôt et placement du Québec, one of Canada's and North America's biggest pension funds, is backing National Bank's deal through a C$500 million investment in National Bank.

The Caisse said it would become National Bank's second-largest shareholder once the transaction is complete. The pension fund manages the contributions of Quebec residents, and it has a mandate to earn returns while contributing to economic development in the French-speaking province.

National Bank and Canadian Western said Tuesday that the deal would bring together two complementary banks with growing businesses and allow the combined entity to offer better products and services at a national scale.

The deal, under which each Canadian Western share would be exchanged for 0.45 share of National Bank, gives Canadian Western shares a value of C$52.24 apiece. The companies said that exchange ratio represented a 100% premium on the 20-day volume weighted average trading price for Canadian Western.

Canadian Western Bank holds about C$37 billion in loans and has 39 branches located in western Canada and Ontario. The companies said the combination would increase National Bank's commercial banking portfolio by about 52%.

The merger is expected to boost adjusted per-share earnings through cost and funding synergies, the companies said. National Bank said it had identified C$270 million in pretax annual cost and funding synergies.

The deal is subject to approval by two-thirds of Canadian Western shareholders at a special meeting. Furthermore, the deal will be scrutinized by Finance Minister Chrystia Freeland and the country's antitrust watchdog. Under Canadian law, Freeland will have final say on whether the banking deal can proceed.

Representatives for Freeland weren't immediately available for comment. Late last year, Freeland approved Royal Bank of Canada's acquisition of HSBC Holdings' Canadian unit, a deal valued at $10.1 billion.

The National Bank-Canadian Western merger is expected to close by the end of 2025.

National Bank said it was planning to launch a public offering and a concurrent private placement of subscription receipts connected to its acquisition, with expected gross proceeds of about C$1 billion. That cash is expected to be used to maintain strong regulatory capital ratios after the deal closes and to fund the consideration and expenses under the deal, the company said.

Write to Ben Glickman at ben.glickman@wsj.com and Paul Vieira at paul. vieira@wsj.com

(END) Dow Jones Newswires

June 11, 2024 18:28 ET (22:28 GMT)

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