Bank of Nova Scotia (BNS: Quote,BNS.TO: Quote) said Wednesday it has agreed to acquire ING Bank of Canada from Netherlands-based parent ING Group N.V. (ING: Quote) for C$3.126 billion in cash. Scotiabank, which is the third largest bank in Canada by deposits, expects to close the deal by the end of this year.
Scotiabank said the deal is expected to result in a net investment of about C$1.9 billion after deducting the current excess capital at ING Direct. It also will fund the acquisition via a public offering of 29 million common shares at C$52 on a bought deal basis, for gross proceeds of C$1.508 billion.
By acquiring ING Bank of Canada, also known as ING Direct, Scotiabank will gain about C$40 billion in assets, C$30 billion in deposits, 1.8 million customers. It will also add into its payroll 1,100 employees from ING Direct.
Commenting on the deal, Rick Waugh, chief executive officer of Scotiabank, said the acquisition will provide a new source of incremental earnings beginning in year one and a new deposit base to diversify its funding.
ING Direct is the 8th largest bank in Canada. A branchless bank, it serves customers online, via contact centers and mobile devices, offering savings, mortgages and four mutual funds. Scotiabank said that ING Direct will continue to operate separately.
Meanwhile, ING Group said the sale of ING Direct Canada is expected to lead to a transaction gain of 1.1 billion euros, after tax, and a capital release of 1.4 billion euros at closing. The transaction is expected to strengthen ING Bank's capital position, leading to a pro-forma core Tier 1 ratio of 11.6 percent.
ING Group also clarified that it will continue to operate its Direct units in Australia, Austria, France, Germany, Italy and Spain.
ING Group's sale of ING Direct comes ahead of a planned separation of its banking and insurance businesses. The Group, which had to bank on state funding during the 2008 financial crisis, has been evaluating its portfolio of businesses and seeking ways to buttress its capital position. Last year, ING Group sold its U.S. online banking unit ING Direct USA to Capital One Corp. (COP) for $9.0 billion.
In June, Moody's Investors Service downgraded the long-term debt and deposit ratings of ING Bank N.V. and four other Dutch banks, stating they would face difficult operating conditions throughout the year, amid the European debt crisis, recession and lower house prices.
Shares of Scotiabank closed at $54.16, up 1.31%, on a volume of about 1.0 million shares on the NYSE. In after hours, the stock dropped $1.44 or 2.66%.
On the TSX, the stock closed at C$53.60, up 1.32%, on a volume of over 2.2 million shares.
Shares of ING closed at $7.18, down 0.14%, on a volume of 1.9 million shares on the NYSE.
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by RTT Staff Writer
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