TORONTO (Reuters) - Royal Bank of Canada RY.TO said on Tuesday it will buy Caribbean bank RBTT Financial Group for a total of about $2.2 billion (C$2.2 billion), building on the Canadian bank's modest presence in the region.
Shareholders of Trinidad and Tobago-based RBTT will receive about $6.33 per share, payable in a combination of 60 percent cash and 40 percent Royal Bank of Canada common shares. The offer represents an 18 percent premium to RBTT’s closing price on September 28, before a local news report over the weekend pegged RBC as the buyer.
For Royal, Canada’s largest bank, it is the second international acquisition in as many months, and an executive hinted at more to come.
“This franchise creates a base for future expansion down the road” not only in the Caribbean, but possibly in Central America and South America, Peter Armenio, RBC’s head of U.S. and international banking, said on a conference call.
RBC said the deal, which is expected to close by the middle of next year, will “mildly” increase its earnings per share in 2008.
But the combination will be “transformational” for RBC in the Caribbean, as the new entity will become the fourth largest bank by assets in the region, Armenio said.
It would be bigger than domestic rival, Canadian Imperial Bank of Commerce CM.TO, which owns FirstCaribbean International Bank.
Analyst Brad Smith of Blackmont Capital in Toronto said that FirstCaribbean had been considered a frontrunner to acquire RBTT, which has been in discussions with interested suitors for about a year.
RBTT said its board has approved the deal and unanimously recommended that shareholders vote in its favor.
The current chief executive of RBTT, Suresh Sookoo, will become head of RBC’s Caribbean retail banking operations once the two operations are integrated.
There is little overlap in the two organizations, Sookoo and Armenio said on the call.
Royal Bank currently has branches in the Bahamas, Cayman Islands and Barbados.
Royal Bank has no presence in either Trinidad and Tobago or Jamaica, but with the acquisition of RBTT, will become the second- and third-largest players in those markets, respectively.
The lack of duplication means there will be no cost savings, but there should be “revenue synergies” as the combined entity will have a broader array of products to sell customers, Armenio said.
With more than US$13.7 billion in assets, the combined operations will have 130 branches across the Caribbean employing more than 6,900 people.
RBC’s expanded Caribbean retail banking operations will be headquartered in Port of Spain, the capital city of Trinidad and Tobago.
The deal is subject to approval by regulators and RBTT shareholders.
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