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CWB announces strategic transaction to refine its growth strategy

Canadian Western Bank Group (TSX: CWB) today announced a refinement to its long-term growth strategy with a definitive agreement to sell its property and casualty insurance subsidiary, Canadian Direct Insurance (CDI), to Intact Financial Corporation (Intact) for $197 million in cash. The purchase price is approximately 2.5 times the net book value of CDI as at October 31, 2014. The transaction is subject to customary closing conditions, including regulatory approvals. The closing date is expected in mid-2015.

“This transaction is the result of a purposeful strategic assessment that we started over a year ago,” said Chris Fowler, CWB’s president and chief executive officer. “Our strategic direction is to increase the depth and breadth of client relationships through a focus on our core business banking platform with complementary financial services in personal banking, equipment finance and leasing, alternative mortgages, wealth management and trust services. These core areas provide the best opportunities to drive meaningful future growth and build long-term value for CWB shareholders, while the insurance business is much less strategically aligned. We believe this opportunity to monetize and redeploy the significant value created by CDI into our identified core areas will generate superior returns for CWB shareholders moving forward.” 

“Upon closing, we estimate the capital generated from the expected gain on sale from this transaction will increase CWB’s common equity Tier 1 ratio by approximately 60 basis points. The gain will also drive considerable outperformance relative to our published 2015 key profitability targets and growth in earnings per common share. However, the resulting elevated capital level is expected to constrain our 2015 return on common shareholders’ equity from continuing operations. As stated, it is our intention to redeploy this capital in due course for strategic and accretive opportunities that are consistent with our risk appetite. This capital level will position us to move quickly on investment opportunities as they materialize. Our primary areas of interest for potential strategic acquisitions are centred on opportunities in equipment finance and leasing, and wealth management.”

“Executing our long-term strategic plan includes capitalizing on the growth potential in CWB’s business banking speciality and other niche areas that we are currently supporting with large investments in our core technology systems. We remain optimistic about our pipeline of high quality growth opportunities that will continue to be supported by our disciplined underwriting and proven loan management capabilities, as well as our low balance sheet leverage and strong capital position as measured under the Standardized approach for calculating risk-weighted assets. We look forward to providing additional performance details with our scheduled first quarter results news release on March 5th. At that time, we will also update the expected impact of this transaction on our fiscal 2015 performance target ranges.”

“CDI’s strong market position attracted significant interest from a broad list of potential buyers. While Intact was ultimately the successful bidder, their demonstrated focus on customer service and commitment to employees were additional factors we considered in selecting them as our preferred partner for this transaction. The employees of CDI have made tremendous contributions to the CWB Group over the past 10-plus years, and we appreciate all they have done to responsively serve clients and contribute to the success of CWB Group. While the strategic and business rationale for this sale is clearly very positive for CWB Group, we are always sensitive to any decisions that directly impact employees,” concluded Mr. Fowler.

Deloitte Corporate Finance Inc. is acting as exclusive financial advisor to CWB.

Kirby Hill, CFA
Vice President, Strategy & Communications
Canadian Western Bank
Phone: (780) 441-3770
Email: [email protected]

Matt Evans, CFA
AVP, Investor Relations
Canadian Western Bank
Phone: (780) 969-8337
Email: [email protected]