Financial services provider Canadian Imperial Bank of Commerce, or CIBC, (CM,CM.TO) Tuesday announced the acquisition of a minority interest in Bermuda-based Bank of N.T. Butterfield & Son Limited.
Canada-based CIBC said it has invested US$150 million under the terms of the transaction as part of a US$550 million recapitalization of Butterfield. The Carlyle Group and several other institutional investors have invested the remaining US$400 million to complete the recapitalization.
CIBC also stated that Butterfield's public shareholders will have the right to participate in the recapitalization by subscribing for additional common shares under a US$130 million rights offering. This could reduce the size of CIBC's investment by up to US$25 million. In addition, CIBC has provided Butterfield with a commitment letter for a senior secured credit facility for up to US$500 million.
Based on the investment, CIBC owns 22.5% of Butterfield's equity in the form of common shares and convertible voting preference shares. CIBC will nominate two of 12 directors on Butterfield's Board of Directors. CIBC's pro forma ownership will be reduced to 18.8% of Butterfield, if at least US$25 million of additional common shares are issued under Butterfield's rights offering.
CIBC has also invested US$26 million indirectly in Butterfield through a private equity fund sponsored by The Carlyle Group. CIBC previously committed US$150 million to the Carlyle fund to invest in financial services transactions.
CIBC Wholesale Banking and Bank of America Merrill Lynch acted as CIBC's financial advisors and Mayer Brown LLP and Appleby Global acted as CIBC's legal advisors on this transaction.
CM closed Tuesday's trading at US$69.76 on the NYSE, up US$1.81, on a volume of 268,700 shares.
On the TSX, CM.TO closed at C$72.25 on Tuesday, up C$2.32, on a volume of 1.24 million shares.
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