Royal Bank of Canada (RY,RY.TO) said it agreed to acquire the 50 per cent stake that RBC does not already own in the joint venture RBC Dexia Investor Services Ltd. from Banque Internationale à Luxembourg S. A. for total consideration of 837.5 million euros, or C$1.1 billion, in cash. Following the closing of the transaction, Royal Bank of Canada will own 100 per cent of RBC Dexia.
Royal Bank of Canada expects the acquisition to be moderately accretive to earnings in 2013.
In conjunction with entering the agreement, RBC Dexia has sold C$1.9 billion in nominal value of Dexia Group fixed income securities back to the Dexia Group (DEX.L, DXBGF.PK) and acquired approximately an equivalent amount of U.S. dollar-denominated securities consisting primarily of notes issued by large global financial institutions. RBC Dexia will incur a loss from the sale of the Dexia Group securities and RBC's proportionate share of this loss is approximately $30 million after tax, which will be recorded in the second quarter. RBC Dexia's capital position is not materially impacted from this sale and purchase of securities.
At closing, this deal is expected to reduce Royal Bank of Canada's January 31, 2012 Tier 1 capital ratio on a pro forma basis by approximately 25 bps.
The acquisition is anticipated to close in mid-2012.
by RTT Staff Writer
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