Smith Financial To Acquire Home Capital Group For $44 Per Share
Home Capital Group (TSX: HCG) is going private. The firm this morning revealed that it has entered into a definitive agreement to be acquired by Smith Financial Corporation, which is controlled by Stephen Smith.
The deal will see the private lending company acquired at a valuation of $1.7 billion, with Smith Financial set to pay $44.00 in cash per share. The figure represents a 72% premium to the twenty day volume weighted average price of the equity.
Prior to the transaction, Smith Financial held a 9.1% stake in Home Capital Group.
“With its talented workforce, diversified presence across Canada, trusted positions as a lender and deposit-taker and 36-year operating history, Home Capital is a strategic asset. Having followed the development of the business for three decades, I can attest to Home Capital’s strong partnerships with mortgage brokers and great customer relationships,” said Stephen Smith in announcing the transaction.
The transaction is subject to 66.6% of shareholders approving of the deal, as well as regulatory approvals and customary closing conditions. The deal also includes a “Go-Shop Period” for Home Capital, which will be in place until December 20, 2022, during which time the company can solicit a superior offer from interested third parties.
A $25 million termination fee is applicable during that period. After this period, a $50 million termination fee will then be place. A reverse-termination fee of $60 million is payable by Smith Financial in the event regulatory approvals cannot be obtained by November 20, 2023.
The transaction is currently anticipated to close in mid-2023.
Smith Financial is the holding company of Stephen Smith, and currently has a number of major investments within the banking industry, including in Equitable Bank, Fairstone Bank of Canada, Canada Guaranty Mortgage Insurance Company, Peloton Capital Management, and Glass-Lewis & Co.
Home Capital Group last traded at $27.05 on the TSX.
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