- National Bank of Canada (TSX:NA) will acquire Canadian Western Bank (TSX:CWB) for C$5 billion or C$52.24 per share, a 110 per cent premium to Tuesday’s closing share price
- The acquisition is expected to result in about C$270 million in pre-tax annual cost and funding synergies
- National Bank is one of Canada’s Big Six banks with C$442 billion in assets as of April 30, 2024
- National Bank stock has added 20.95 per cent year-over-year and 88.47 per cent since 2019
National Bank of Canada (TSX:NA) will acquire Canadian Western Bank (TSX:CWB) for C$5 billion or C$52.24 per share, a 110 per cent premium to Tuesday’s closing share price.
Canadian Western Bank, based in Edmonton, is a diversified financial services company across business and personal banking, specialized financing, comprehensive wealth management and trust services. The company operates 39 branches across Western Canada and Ontario.
The acquisition will grow National Bank’s commercial banking portfolio by 52 per cent, driven by Canadian Western Bank’s C$37 billion in loans, and allow it to increase products and services across a larger network at a more competitive price, in addition to benefitting from about C$270 million in pre-tax annual cost and funding synergies.
These savings and bolstered offerings will strengthen National Bank’s existing presence in Western Canada, with Alberta and British Columbia representing 24 per cent of the company’s assets under management, including more than C$24 billion in client assets and more than C$25 billion in business loans.
The transaction is expected to close in September 2025, subject to regulatory approvals and the approval of 66.66 per cent of votes cast by Canadian Western Bank shareholders at a meeting in September 2024.
From a valuation perspective, did National Bank make a smart acquisition?
Considering that Canadian Western Bank is a consistently profitable operation that has grown revenue by more than 60 per cent since 2019, and that shares are down by about 15 per cent over the period – prior to the acquisition – it is reasonable to suppose that the market has been unjustifiably discounting the business’ potential for long-term value creation. Shareholders since inception in 1995 have been rewarded with an 872 per cent return that will cross 2,000 per cent once the market opens.
That said, National Bank’s willingness to pay such a high premium suggests excessive exuberance in Canadian Western Bank’s earning power, and perhaps a reluctance to lose ground on its five largest competitors, even if it means finding value through efficient business integration as opposed to price.
Leadership insights
“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,” Laurent Ferreira, president and chief executive officer of National Bank, said in a statement. “Canadian Western Bank 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. I look forward to joining forces with the Canadian Western Bank team so that together, we deliver a stronger banking choice for all Canadians and Canadian businesses.”
“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,” added Chris Fowler, chief executive officer of Canadian Western Bank. “Together, we can offer Canadians more choice by combining our 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.”
About National Bank
National Bank is one of Canada’s Big Six banks with C$442 billion in assets as of April 30, 2024, spread across personal and commercial banking, wealth management, financial markets, and U.S. specialty and international finance.
National Bank stock (TSX:NA) last traded at C$116.34 per share. The stock has added 20.95 per cent year-over-year and 88.47 per cent since 2019.
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(Top photo of Canadian Western Bank’s Chinook banking centre in Calgary: Canadian Western Bank.)