National Bank of Canada to acquire Canadian Western Bank in $3.6bn deal

September 2024 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

September 2024 Issue

National Bank of Canada has agreed to acquire Canadian Western Bank in a deal worth $3.6bn.

The acquisition will combine the sixth- and eighth-largest lenders in the country respectively, and will increase National Bank’s commercial banking portfolio by 52 percent.

The transaction, which is expected to close by the end of 2025, subject to approval from CWB shareholders and receipt of required regulatory approvals, is not subject to any financing condition, according to a statement released by National Bank.

The board of National Bank has evaluated the agreement with National Bank’s management and legal and financial advisers and has unanimously determined that the deal is in the company’s best interests. National Bank shareholder approval is not required in connection with the deal.

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

“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,” said Laurent Ferreira, president and chief executive of National Bank. “CWB has developed an attractive banking franchise with a reputation for exceptional service with deep customer relationships across a number of priority industries and service lines. This combination will provide customers with access to a broader range of services, expertise and products, along with the benefits of supporting technological investment and innovation.

“When we combine these strengths with our commercial and retail banking offering, leading wealth management and capital markets franchises, we will be able to do more for clients, both existing and new, and unlock significant value creation opportunities,” he added.

“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 Canadian Western Bank. “Together, we can offer Canadians more choice by combining CWB’s four-decade legacy of serving business owners and their families with National Bank’s scale, complementary market expertise and the technological capabilities necessary to accelerate our growth.

“Our two organizations share similar values grounded in an unwavering commitment to our clients, a deep history of entrepreneurship and a commitment to giving back in the communities we serve. We’re excited to build on this legacy together,” he added.

The deal is the latest in Canada’s highly regulated banking market, which is predominantly overseen by the big six lenders, including the National Bank, the TD, Royal Bank, the Bank of Montreal, Scotiabank and CIBC. Earlier in 2024, Royal Bank of Canada – the country’s largest lender – acquired HSBC Canada.

Canadian Western Bank was first founded in 1984 and focuses on commercial banking. With 39 branches and more than 65,000 clients in Canada, its specialisms lie in equipment financing, trust services and wealth management. The bank’s operations are predominantly concentrated in Alberta and British Columbia, but its acquisition will help the bank expand into other areas. Likewise, its $26.9bn loan book increases National Bank of Canada’s lending portfolio outside of Quebec by 37 percent. CWB’s C$37bn loan book includes equipment financing, commercial loans, mortgages, real estate and oil & gas loans.

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$270m in pretax annual cost and funding synergies.

Canada’s second-largest pension fund, Caisse de depot et placement du Québec, said it would invest C$500m to complete the acquisition, which would make it the second-largest shareholder in National Bank.

Richard Summerfield