EQB Inc. T.EQB.PR.C

Primary Symbol: T.EQB Alternate Symbol(s): EQGPF

Financial Services

EQB Inc. operates through its wholly owned subsidiary Equitable Bank. Equitable Bank provides diversified personal and commercial banking through its EQ Bank platform. The Company operates through two main divisions: Personal Banking and Commercial Banking. Its Personal Banking segment consists of deposits, single family residential mortgage loans, home equity lines of credit, reverse mortgages, insurance lending, and payment infrastructure partnerships. Its savings products are offered through EQ Bank, Equitable Bank, Equitable Trust, and a network of independent financial planners and brokers. Its Commercial Banking segment lends loans through a network of mortgage and leasing brokers, lending partners, and other financial institutions. Commercial loans involve lending on multi-unit residential, industrial and office buildings, and other commercial properties. It also specializes in the creation, structuring, and management of pooled Canadian commercial mortgage funds.

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EQB Inc.

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Post by retiredcfon Oct 03, 2023 10:45am

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Post# 35666772

RBC

October 2, 2023

EQB Inc.
Expands into asset management through an agreement to acquire ACM Advisors

TSX: EQB | CAD 75.20 | Outperform | Price Target CAD 97.00

Sentiment: Neutral
Summary: EQB announced it entered into a definitive agreement to acquire a 75% stake in alternative asset manager ACM

Advisors. Key transaction details:

ACM has $4.8B of assets under management (AUM) and was established in 1993. It specializes in creating, structuring and managing pooled Canadian commercial mortgage funds on behalf of pension plans, investment funds, charitable foundations, corporations and accredited retail investors.
ACM will operate as an independent subsidiary of EQB, separate and distinct from Equitable Bank. ACM is being acquired at the EQB level (not by Equitable Bank).
EQB did not disclose financial terms, but expects the transaction to be accretive to EPS in the first year with the transaction expected to close before the end of 2023, subject to regulatory approvals. The transaction has been approved by the Boards of Directors of EQB and ACM and all shareholders of ACM. EQB said the acquisition financing is cash plus a de minimis number of EQB shares to be issued at closing based on a volume weighted average price.
EQB said ACM would add 2,000+ client relationships, both investors in the funds (200 institutional clients across Canada) + commercial mortgage borrower relationships.
Existing ACM management would remain with the business. ACM has 40 employees in 4 offices.

There is a conference call at 9am EST today; dial-in: (416) 764-8668.

Our take: We think the acquisition represents a logical next step in EQB's evolution into a more diversified bank. Although operating in asset management is new for EQB, it is directionally lower risk given ACM manages assets that EQB is very familiar with given the company has provided financing to commercial borrowers for >50 years and has a commercial loan portfolio of $28B (70% relating to multi-unit residential housing). Furthermore, it diversifies EQB's earnings by providing great fee non-interest income. We think some of the other potential benefits of the transaction could include:

The transaction would likely introduce new commercial mortgage borrower relationships that could help EQB with new commercial loan originations; and
EQB's existing commercial mortgage lending business could potentially be a new source of loans used in ACM's investment funds and therefore help accelerate their growth.