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Laurentian Bank is being spun off and sold; Its commercial operations will go to Fairstone Bank of Canada in a $1.9 billion deal, while National Bank is buying the retail and small business segment for about book value.
The deal is the culmination of years of fighting for the more than 175-year-old bank to get back on its feet or find a buyer willing to pay enough to satisfy shareholders.
Under the terms, the Laurentian name will remain part of Fairstone, with the commercial segment headquarters remaining in Montreal and CEO Éric Provost continuing in his role.
But its presence on the main streets of Quebec will not.
Laurentian’s 57 branches will not be transferred to National Bank, nor will its employees, who will have the option to apply for open positions at the bank.
The move will affect the majority of Laurentian’s approximately 2,715 employees, although it is unclear how many will remain part of business operations at Fairstone.
The deal is an acceleration of Laurentian’s move toward the commercial side, Provost said in a statement.
“Joining forces with Fairstone Bank will allow us to further grow our specialist commercial business while maintaining our brand,” he said.
The business 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 at National, he said.
Part of Laurentian’s problems was its delay in adapting to new technologies, since the bank launched its first application just a few years ago.
The agreement is still subject to approval
Under the agreement, Fairstone Bank will pay $40.50 per Laurentian Bank share in cash, while the amount National Bank will pay will be based on outstanding balances at closing.
The deal with Fairstone is subject to approval by a two-thirds majority of Laurentian Bank shareholders.
The Caisse de dépôt et position du Québec, which owns about eight per cent of Laurentian’s shares, said in a statement that it supports the deal, given the competitive banking landscape.
The deal marks another big step of growth for alternative lender Fairstone, which last year merged with Home Trust, leaving the bank with around two million customers and 255 branches. Before that, Home Trust itself grew after Smith Financial Corp. acquired it in a roughly $1.7 billion deal in 2023.
Meanwhile, National Bank will see its customer base grow as it acquires Laurentian’s approximately $10.9 billion in retail loans and deposits and $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 benefits current shareholders, an exit that we did not consider likely.”
He said that the agreement is also a boost for Nacional.
“National not only benefits from increasing scale in its home province, but it does not have to deal with the legacy problems associated with the Laurentian branch system,” Aiken said.
“Getting the assets, deposits and mutual funds at book value is just the icing on the cake.”
