Purchase sees one bank buying commercial lending operations, while another takes retail
by Mathieu Dion and Christine Dobby
Laurentian Bank of Canada reached an agreement to sell itself to Fairstone Bank for C$1.9 billion ($1.4 billion) and will hive off its retail banking unit to focus on commercial lending.
Fairstone will pay C$40.50 per share in cash, a 20% premium to Monday’s closing price. Prior to that deal closing, National Bank of Canada, the country’s sixth-largest lender, will acquire all of Laurentian’s retail and small-business assets and liabilities, according to a statement Tuesday.
The three-way transaction would resolve longstanding questions about the future of Laurentian, a small Montreal-based bank that has struggled to keep up with larger rivals in banking technology. Two years ago the board went through a strategic review that ended without finding a buyer. That was followed by a major technology breakdown and the sudden departure of the chief executive officer.
Fairstone is an alternative mortgage lender that also offers a variety of other financial products. It’s closely held, but in January it announced that Smith Financial Corp., the vehicle of Canadian billionaire Stephen Smith, had taken a majority voting interest. Centerbridge Partners and Ontario Teachers’ Pension Plan Board are minority owners, Fairstone said at the time.
The deal has the backing of the Caisse de Depot et Placement du Quebec, which is the largest shareholder in Laurentian with an about 8% stake, according to data compiled by Bloomberg. “Our support is predicated on the fact that the proposed offer is attached to guarantees obtained regarding maintaining Laurentian Bank’s commercial head office locally and moving Fairstone Bank’s head office to Montreal,” said Kim Thomassin, the pension fund’s head of Quebec.
The transaction will add “scale and accelerate growth in commercial real estate across the country, particularly in Quebec,” Fairstone said in the statement.
Éric Provost will continue as Laurentian’s CEO after the transaction is completed, which is expected late next year, subject to regulatory approvals.
Laurentian has retail loans and deposits of C$3.3 billion and C$7.6 billion, respectively, while the small-business loans and deposits total C$1.4 billion.
National Bank won’t assume any of Laurentian’s bank branches or employees, and all branches of Laurentian Bank located in Quebec will eventually be closed.
“National not only benefits by increasing its scale in its home province but does not have to deal with the legacy issues associated with Laruentian’s branch system,” Jefferies analyst John Aiken said in a note to clients. “Getting the assets, deposits and mutual funds at book value is simply icing on the cake.”
National Bank, which had revenue 13 times greater than Laurentian in fiscal year 2024, expects the deal to add 1.5% to 2% to adjusted earnings per share, which “appears reasonable, while benefiting return on equity in the first year after completion,” said Bloomberg Intelligence analyst Paul Gulberg.
National also acquired Canadian Western Bank earlier this year for C$5 billion, giving it a bigger footprint in the western provinces of Alberta and British Columbia.
(Updates with acquisition premium, Fairstone and CDPQ’s statements and analyst comment, beginning in the second paragraph.)
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