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Laurentian Bank is being split up and sold, with its commercial operations going to Fairstone Bank of Canada in a deal valued at $1.9 billion, while National Bank is buying the retail and small business segment at approximately book value.
The deal is the culmination of a years-long struggle to get the more than 175-year-old bank to change or find a buyer willing to pay enough to satisfy shareholders.
Under the terms, the Laurentian name will remain as part of Fairstone, while the commercial segment will remain headquartered in Montreal and CEO Eric Provost will continue to serve in his role.
But there will be no presence on the main streets of Quebec.
Laurentian's 57 branches will not be transferred to National Bank, nor will its employees, who will instead have the opportunity to apply for open positions at the bank.
The move will affect most of Laurentian's approximately 2,715 employees, although it is unclear how many will remain part of Fairstone's commercial operations.
The deal accelerates Laurentian's commercial expansion, Provost said in a statement.
“Joining forces with Fairstone Bank will allow us to further develop our specialist commercial business while maintaining our brand,” he said.
The commercial focus includes real estate lending, inventory and equipment financing, brokerage services and capital markets activities.
Laurentian customers will benefit from more services and better technology from National, he said.
Part of Laurentian's problems have been its lag in adapting to new technologies: the bank launched its first app only a few years ago.
The deal is still subject to approval
Under the terms of the transaction, Fairstone Bank will pay $40.50 per share of Laurentian Bank in cash, and the amount National Bank will pay will depend on the outstanding balances at the closing of the transaction.
The Fairstone transaction is subject to approval by a two-thirds majority vote of Laurentian Bank shareholders.
The Caisse de dépôt et placement du Québec, which owns about eight percent of Laurentian's shares, said in a statement it supported the deal given the competitive banking environment.
The deal marks another big step in the growth of alternative lender Fairstone, which merged with Home Trust last year, leaving the bank with about two million customers and 255 branches. Before that, Home Trust grew after it was acquired by Smith Financial Corp. in 2023. for an amount of approximately $1.7 billion.
Meanwhile, National Bank will see its customer base expand as it takes on approximately $10.9 billion in retail loans and deposits, as well as $1.4 billion in small and medium-sized business loans and deposits.
Overall, the deal looks as good as could be expected, Jefferies analyst John Aiken said in a note.
“The sale of Laurentian Bank is an exit that will benefit current shareholders, an exit that we do not believe is likely.”
He said the deal was also a boost for National.
“National not only benefits from increased scale in its home province, but also does not face the legacy issues associated with Laurentian's branch system,” Aiken said.
“Getting assets, deposits and mutual funds at book value is just icing on the cake.”
