National Bank to raise more equity for CWB deal after shares recover

The Montreal-based lender struck a deal last month to buy CWB in an all-stock transaction valued at C$5bil at the time. — Bloomberg

MONTREAL: National Bank of Canada is raising an additional C$20mil (US$15mil) in connection with its planned acquisition of Canadian Western Bank (CWB), according to people familiar with the matter.

The Montreal-based lender struck a deal last month to buy CWB in an all-stock transaction valued at C$5bil at the time.

It said it would issue about C$1bil of new equity, with half of that coming through a private placement with pension manager Caisse de Depot et Placement du Quebec.

The rest, a total of C$500mil, was done through a bought-deal offering at C$112.30 per subscription receipt that closed on June 17.

Now, a month later, National is planning to sell an additional 178,000 subscription receipts at the same price.

The possibility of an additional equity raise – known as an over-allotment – is often announced at the same time as the initial sale of shares.

Assuming there’s enough demand, the underwriting banks can sell more of the stock to fund managers and other clients than they’ve bought, which gives the banks a temporary short position.

The banks can then exercise the over-allotment to cover that short.

“Demand for the initial offering was stronger than expected,” National Bank spokesperson Alexandre Guay said.

He didn’t comment on the specifics but said that the bank had previously indicated that it granted underwriters, as well as the Caisse, an over-allotment option which they could choose to exercise. — Bloomberg