National Bank to buy Canadian Western Bank at $5-billion valuation

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.

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

The deal comes just months after RBC closed its $13.5-billion acquisition of HSBC Canada, which drew criticism for increasing market concentration as it meant the loss of what was Canada’s seventh-largest bank.

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What does the deal mean for Canadians?

National Bank, the sixth largest in Canada, says 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 the B.C. and Alberta, where National currently has only three in each, compared with 280 in Quebec.

The deal will also see National expand its lending portfolio outside of Quebec by 37% 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,” said Ferreira.

What’s changing at National Bank?

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 says there is little overlap with Canadian Western.

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

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

The deal will see each CWB share, other than those already held by National, 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 says the exchange ratio values each CWB share at $52.24, representing a 110% premium to Tuesday’s closing price of $24.89.

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

It says 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. 

Investment from Quebec pension fund helps secure the deal

To help fund the deal, National Bank secured a $500 million investment from CDPQ, 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.

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