Laurentian Bank announces sale to Fairstone Bank and National Bank

Laurentian Bank is being divided and sold, with its commercial operations going to Fairstone Bank of Canada in a $1.9 billion deal, while National Bank is buying the retail and small business segments for roughly book value.

The deal is the culmination of a years-long struggle for the more than 175-year-old bank to turn itself around, or find a buyer willing to pay enough to satisfy shareholders.

Under the terms, the Laurentian name will remain as part of Fairstone and the commercial segment’s head office will remain in Montreal, and chief executive Eric Provost will remain in his role.

But it will not have a presence on Quebec’s main streets.

Laurentian’s 57 branches will not be transferred to National Bank, nor will its employees, who will have the option to apply for open roles at the bank.

The move will affect most of Laurentian’s approximately 2,715 employees, although it is unclear how many will remain at Fairstone as part of the commercial operations.

The deal is an acceleration of Laurentian’s move deeper into the commercial side, Provost said in a statement.

“Joining forces with Fairstone Bank will help us further grow our specialty commercial business while maintaining our brand,” he said.

Commercial focus includes real estate lending, inventory and equipment financing, intermediary services and capital markets activities.

Laurentian customers will benefit from more services and better technology at National, he said.

Part of Laurentian’s struggles was its delay in adopting new technology, with the bank launching its first app only a few years ago.

The deal is still subject to approval

Under the deal, Fairstone Bank will pay $40.50 in cash per share of Laurentian Bank, while the amount paid by National Bank will be based on the outstanding balance at closing.

The Fairstone deal is subject to approval by a two-thirds majority by Laurentian Bank shareholders.

Caisse de depot et placement du Quebec, which owns about eight per cent of Laurentian shares, said in a statement that it supports the deal given the competitive banking landscape.

The deal is another major growth step for alternative lender Fairstone, which merged with Home Trust last year, leaving the bank with almost two million customers and 255 branches. Earlier, Home Trust itself had risen after it was acquired by Smith Financial Corp. in a deal worth about $1.7 billion in 2023.

Meanwhile, National Bank will see its customer base expand as it takes on about $10.9 billion in retail loans and deposits from Laurentian and $1.4 billion in small and medium enterprise loans and deposits.

Overall, the deal looks as good as could have been expected, Jefferies analyst John Aiken said in a note.

“The sale of Laurentian Bank is an exit that benefits current shareholders in a way we did not foresee.”

He said the deal is also a boost for National.

“Growing our scale in our home province not only benefits National, but also not having to deal with the legacy issues associated with Laurentian’s branch system,” Aiken said.

“Acquiring assets, deposits and mutual funds at book value is like icing on the cake.”