The merger seems not acceptable as National Bank's stock dipped by 9% since the announcement of the acquisition
The market seems pretty uneasy as the National Bank of Canada announced its intention to acquire Canadian Western Bank (CWB) as the price of the former’s stocks dipped after the said announcement.
A Bloomberg BNN report says that last week, the National Bank of Canada, the country’s sixth-largest lender agreed to buy Canadian Western for $5 billion, or $52.24 a share, which is a 26% premium over the target’s closing price last Friday, June 14th. However, according to the report, National Bank’s stock price has slipped nearly 9% since the tie-up was announced after the market close on June 11. The National Bank earlier said that the deal will “accelerate domestic growth.”
Nevertheless, for Scotia analyst Meny Grauman, the National Bank-CWB deal is a “strategic winner.”
“Overall, we have a very positive view of this transaction,” said Grauman. “We tend to view in-market transactions as relatively low risk for large Canadian banks.”
Grauman also said that the proceeds from the acquisition will be used to increase the capital levels of the National Bank. When the deal is closed, it is expected that its common equity tier 1 (CET 1) will be 12.5% or higher. However, for Grauman, this is “conservative,” since the regular minimum levels stand at 11.5% and is not expected to change in the coming days.
Meanwhile, the deal still needs the Canadian government and two-thirds of CWB’s shareholders. However, reports say that the deal could be under scrutiny because of competition concerns as regional banks across the country have been consolidating.
Nonetheless, Grauman is positive that the deal will get a nod from the authorities and even said earlier that he does not see “any competing offers coming over the top.”
The National Bank of Canada is the sixth-largest commercial bank in the country, with its main office based in Montreal. It has branches in almost all provinces in Canada with more than 2.4 million personal clients. On the other hand, CWB started as a small bank in Edmonton, Canada in 1984 and has grown ever since. It is under the CWB Financial Group.
