Laurentian Bank of Canada (TSX:LB) announced that it has reached a definitive agreement under which a subsidiary of the Bank has agreed to acquire Northpoint Commercial Finance, which is an inventory finance lenders with a portfolio of approximately $1.2 billion as of March 31, 2017. The transaction is expected to close before the end of fiscal 2017, subject to customary closing conditions, including applicable regulatory notifications and approvals.
“Our acquisition by LBC Capital, a division of Laurentian Bank, is a natural and anticipated part of our evolution as an organization. We were founded in 2011 via private equity, but our significant growth over the last five years and our projected growth necessitates long-term access to stable capital. Laurentian Bank, in business for over 170 years, provides tremendous stability," said Dan Radley, president and CEO of Northpoint. “We’re excited to work with the entrepreneurial team at LBC Capital, who we align very well with culturally. They are truly excited about our business and committed to the continuation of our value proposition, which includes a passion for customers, speed in execution and a highly personalized approach to lending.”
The bank believes Northpoint Commercial Finance, which was founded in 2012, is one of only a few diversified inventory finance companies that provides the scale needed to serve North American manufacturers and their dealer networks.
"We are delighted to announce this acquisition that will increase the proportion of revenue generated by commercial activities within the bank mix, which is expected to improve its overall profitability," said Francois Desjardins, president and chief executive officer of Laurentian Bank of Canada. "We continue to make excellent progress on our transformation plan initiatives, including, among others, the optimization of our retail banking activities and the development of our core banking system, the backbone of our digital offer."
"This acquisition is an excellent strategic fit with our equipment finance subsidiary, LBC Capital, resulting in an attractive end-to-end equipment finance platform. It will broaden our Canadian offering and create a U.S. presence, an important customer attribute for manufacturers and dealers looking for a single North American point of service," added Stéphane Therrien, executive vice president, personal and commercial banking at Laurentian Bank."Northpoint team members, led by Chief Executive Officer Dan Radley, have years of experience in inventory financing, unique expertise and strong client relationships with leading companies. We are very happy to welcome them as they join the team under the leadership of Éric Provost, senior vice president, commercial banking at Laurentian Bank and president of LBC Capital."
The bank believes this acquisition will be accretive to its earnings per share in the first full year of operation and by approximately 4 percent in 2019. Based on the anticipated assets on closing and the related equity financing, it is expected the bank's Basel III Common Equity Tier 1 ratio would be maintained within the guided 7.8 percent to 8.2 percent range. The bank plans to finance the acquisition through a $225 million subscription receipts equity financing (the "Equity Financing") and existing balance sheet liquidity.
Laurentian Bank of Canada is a financial institution whose activities extend across Canada. Founded in 1846, its mission is to help customers improve their financial health and it is guided by values of proximity, simplicity and honesty. The bank has more than $43 billion in balance sheet assets and more than $32 billion in assets under administration.