Laurentian Bank undergoes a significant restructuring as it is divided and sold off, with its commercial operations being acquired by Fairstone Bank of Canada in a $1.9 billion transaction, while National Bank is set to purchase the retail and small business segment at book value.
This development marks the conclusion of a prolonged period of challenges for the historic bank, spanning over 175 years, in its efforts to revamp itself or attract a buyer who could meet shareholder expectations.
As part of the agreement, the Laurentian brand will persist within Fairstone, with the commercial segment’s headquarters remaining in Montreal under the leadership of current CEO Éric Provost. However, the bank’s physical presence in Quebec’s main streets will cease to exist.
National Bank will not acquire Laurentian’s 57 branches or its employees, who will have the opportunity to seek positions within the bank. The transition will impact the majority of Laurentian’s approximately 2,715 employees, although the exact number retained for commercial operations at Fairstone remains uncertain.
Provost noted that this deal accelerates Laurentian’s strategic shift towards the commercial sector. He expressed optimism about the collaboration with Fairstone Bank, emphasizing the potential for expanding specialized commercial services while upholding the bank’s identity.
The commercial focus will encompass various services such as real estate lending, inventory and equipment financing, intermediary services, and capital market activities. Customers are expected to benefit from enhanced services and advanced technology under the National Bank.
The deal terms entail Fairstone Bank paying $40.50 in cash per Laurentian Bank share, while National Bank’s payment will be determined by outstanding balances at the transaction’s closure. Approval from a two-thirds majority of Laurentian Bank shareholders is necessary for the Fairstone deal to proceed.
The Caisse de dépôt et placement du Québec, holding approximately eight percent of Laurentian shares, has voiced support for the transaction amid the competitive banking landscape.
This acquisition represents a significant expansion for Fairstone, following its merger with Home Trust last year, resulting in a substantial customer base and branch network. National Bank anticipates growth by acquiring Laurentian’s retail loans and deposits, along with small and medium enterprise loans and deposits.
Analyst John Aiken from Jefferies views the deal positively, considering it a favorable outcome for current Laurentian shareholders and a strategic advantage for National Bank. He highlighted the benefits of increasing scale in the home province and avoiding legacy issues associated with Laurentian’s branches.
In conclusion, the Laurentian Bank sale marks a pivotal moment benefiting all involved parties, with National Bank gaining assets, deposits, and mutual funds at book value, as per Aiken’s assessment.
