Scotiabank, Canada’s third-largest lender, will spend C$1.9 billion after deducting excess capital at ING Direct in the cash deal, the Toronto-based bank said today in a statement. Scotiabank will sell 29 million shares at C$52 each for proceeds of C$1.51 billion to fund the takeover.
“It looks like a good deal,” said Anil Tahiliani, head of North American equities at Calgary-based McLean & Partners Wealth Management Ltd., which manages about C$1 billion including Scotiabank shares. “They’re buying ING to strengthen their retail operations in Canada,” he said by phone.
North American banks including Scotiabank are taking advantage of Europe’s turmoil to buy operations and assets from competitors on the continent that need to raise cash. Under pressure from regulators, ING is reviewing which units to sell as plans to repay a government bailout this year becomes less certain.
Scotiabank said the transaction will add C$30 billion in retail deposits to its balance sheet and 1.8 million customers. ING Direct has assets of about C$40 billion in Canada and employs 1,100 people. Scotiabank said it will keep the ING Direct brand. Scotiabank, which has expanded mostly in Asia and Latin America over the past decade, had C$670 billion in assets at the end of July.
ING, the biggest Dutch financial-services firm, received 10 billion euros of state aid in 2008.
Following it’s bailout, ING was ordered by the EU to sell its insurance operations, its U.S. online bank and Dutch mortgage lender WestlandUtrecht Bank before the end of 2013. It is in discussions with buyers for its Asian life insurance operations and may sell the business in parts to generate higher proceeds, Chief Executive Officer Jan Hommen said earlier this month.
ING has so far repaid 7 billion euros of aid as well as 2 billion euros in interest and premiums.
Hommen sold the company’s U.S. online bank to Capital One Financial Corp. (COF) for about $9 billion in February, and disposed of the Latin American insurance operations last year. The firm has also divested a real estate investment-management business and car-lease unit.
The Canadian transaction is expected to lead to a 1.1 billion-euro gain after tax, Amsterdam-based ING said in a statement. The sale, releasing 1.4 billion euros in capital, should boost ING’s core Tier 1 ratio by 47 basis points, to about 11.6 percent if applied to the ratio as of June 30.
The deal, expected to close in December, would be the biggest bank takeover in North America this year after PNC Financial Services Group Inc. bought Royal Bank of Canada’s U.S. unit for $3.5 billion in March, according to data compiled by Bloomberg. M&T Bank Corp. (MTB) agreed to buy Hudson City Bancorp for about $3.7 billion in a transaction expected to close in the second quarter of 2013.
Scotiabank shares fell 1.2 percent to C$52.25 at the close of trading in Toronto.
The takeover is the biggest bank deal in Canada since Toronto-Dominion Bank (TD) bought Canada Trust for C$8 billion in 1999, Bloomberg data show. Bank of Nova Scotia (BNS) acquired National Trustco Inc. in 1997 for C$1.21 billion, and Toronto-Dominion bought 57 branches from Laurentian Bank of Canada (LB) in 2003 for C$112.5 million.
ING Bank of Canada is the largest foreign-based lender in Canada after HSBC Holdings Plc (HSBA), according to data from the country’s banking regulator. ING is Canada’s eighth-biggest bank by assets in the country.
ING started its Internet bank in Canada, its first branchless venture, in 1997. It built the division through a television advertising campaign in which Dutch actor Frederik de Groot urged Canadians to “Save your money” in accented English and French and criticized fees charged to the nation’s established banks.