National Bank of Canada (TSX: NA) has announced its agreement to acquire Canadian Western Bank (TSX: CWB) in a share-swap deal valued at approximately $5 billion. This transaction, pending regulatory approval, aims to expand National Bank’s footprint in Western Canada, a region pivotal to the country’s energy and mining sectors. The deal is supported by the Caisse de dépôt et placement du Québec (CDPQ), one of North America’s largest pension funds, through a $500 million investment in National Bank.
The agreement will see National Bank, the smallest of Canada’s Big Six chartered banks, acquire all outstanding common shares of Canadian Western Bank. The acquisition is expected to strengthen National Bank’s commercial banking portfolio by approximately 52%, enhancing its loan and revenue diversification.
Laurent Ferreira, President and CEO of National Bank, highlighted the strategic importance of the acquisition, stating, “This transaction is about growth and brings together two great banks with a complementary footprint in personal and commercial banking, and supports our objectives in Western Canada and across the country.”
National Bank has a history of investing in Western Canada, with significant assets under administration and credit authorizations in Alberta and British Columbia. The combined entity will further invest in the Western Canadian economy, particularly in sectors such as energy, agriculture, and affordable housing.
Moreover, the merger will increase community support, with plans to double Canadian Western Bank’s community investment program to over $3 million annually. National Bank’s commitment to local communities and Indigenous partnerships will also be strengthened.
Chris Fowler, CEO of Canadian Western Bank, echoed Ferreira’s sentiments, noting, “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.”
Each share of Canadian Western Bank will be exchanged for 0.450 of a National Bank common share, valuing each CWB share at $52.24 based on the recent trading prices, representing a 110% premium. This exchange will give CWB shareholders approximately 10.5% ownership in National Bank post-transaction.
The deal requires approval from 66⅔% of CWB shareholders, who will vote at a special meeting expected in September 2024. The transaction is anticipated to close by the end of 2025, contingent upon regulatory approvals and the fulfillment of customary conditions.
To support the acquisition, National Bank announced a combined public offering and private placement of subscription receipts, expected to raise approximately $1 billion. The public offering will involve selling 4,453,000 subscription receipts at $112.30 each, with an additional option to sell up to 667,950 more. Concurrently, CDPQ will purchase an equivalent number of subscription receipts in a private placement.
National Bank’s shares fell by over 5% on news of the transaction. However, analysts suggest the long-term benefits of the deal could outweigh initial market reactions, enhancing National Bank’s competitiveness and growth prospects in Western Canada.
National Bank last traded at $110.58 on the TSX.
Information for this briefing was found via Wall Street Journal and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
