Laurentian Bank is set to undergo a division and sale, with Fairstone Bank of Canada acquiring its commercial operations in a $1.9 billion transaction, while National Bank is poised to take over the retail and small business segment at approximately book value.
The agreement marks the resolution of a prolonged period of struggle for the more than 175-year-old institution to revamp itself or attract a buyer willing to meet shareholder expectations.
As per the terms, the Laurentian brand will persist as part of Fairstone, with the commercial segment’s headquarters remaining in Montreal under the leadership of current CEO Éric Provost. However, the bank’s physical presence on Quebec’s main streets will cease to exist, as its 57 branches will not be transferred to National Bank, and its employees will have the opportunity to apply for available positions within the bank.
The majority of Laurentian’s around 2,715 employees will be impacted by the transition, although the exact number that will remain with Fairstone’s commercial operations remains uncertain.
Provost highlighted that the deal signifies an acceleration of Laurentian’s expansion into the commercial domain. He stated, “Partnering with Fairstone Bank will enable us to further enhance our specialized commercial offerings while upholding our brand.”
The commercial focus will encompass areas such as real estate lending, inventory and equipment financing, intermediary services, and capital markets activities. Laurentian’s customers are expected to benefit from an expanded range of services and enhanced technology at National Bank.
One of Laurentian’s challenges was its delay in adapting to modern technology, as evidenced by the bank launching its first app only recently.
The agreement is contingent on approval by a two-thirds majority vote of Laurentian Bank shareholders. The Caisse de dépôt et placement du Québec, which holds about eight percent of Laurentian shares, expressed support for the deal given the competitive banking environment.
The transaction represents a significant growth stride for alternative lender Fairstone, which had previously merged with Home Trust, resulting in approximately two million customers and 255 branches. National Bank will witness an enlargement of its customer base through the acquisition of Laurentian’s retail loans and deposits totaling about $10.9 billion, and small and medium enterprise loans and deposits amounting to $1.4 billion.
Jefferies analyst John Aiken described the deal as meeting expectations, benefiting current shareholders. He noted that National Bank stands to gain by bolstering its presence in its home province without inheriting the legacy issues associated with Laurentian’s branch network.
Aiken further remarked, “Acquiring the assets, deposits, and mutual funds at book value is an added bonus.”
