Desjardins Group, the venerable Quebec financial giant, is planning a national expansion with its bid to buy Western Financial a southern Alberta bank and insurance seller.
The $443-million acquisition of Western Financial, which was announced Thursday, sets the stage for Canada's largest credit union to grow beyond its Quebec roots, where it has become one of the province's biggest financial success stories.
In making the deal, Desjardins chief executive officer Monique Leroux said the company wants to kick-start its growth across Canada. Most of its operations are concentrated in Quebec and southern Ontario, with a smaller number of branches in New Brunswick and Manitoba.
"This transaction will allow us to accelerate our business development in Western Canada," Ms. Leroux said in a statement. "It is perfectly aligned with our strategic plan."
Known as an upstart in the financial world, Western Financial began as a small collection of insurance brokers in 1996 and grew quickly, later expanding into retail banking in 2003. On its first day as a bank, it took in more than $1-million of deposits drawing upon a loyal base of customers in southern Alberta and across the Prairies.
It has since grown to 121 offices stretching from B.C. to Manitoba. Western's assets will allow Desjardins to stitch together operations across most of Canada. Ms. Leroux has spoken in the past about the credit union's ambitions beyond Eastern Canada, but this deal signals the first clear sign of its broad geographic aspirations.
Desjardins, which has $175-billion of assets, agreed to purchase Western Financial for $4.15 per share, a 70-per-cent premium on Wednesday's closing price.
The transaction has been approved by Western's board of directors and is subject to approval by its shareholders. The deal is expected to close in the second quarter of 2011 and contains a $10-million break fee. The price includes the assumption of $56.4-million worth of debt.
In its short life, Western has been called everything from a quirky insurer to a maverick bank not afraid to buck the Canadian financial establishment. Its operations include Canada's oldest and largest pet insurer, and the bank has thrived by building a small but profitable financial operation on the Prairies.
Based in High River, Alta., less than an hour south of Calgary, Western Financial now has 550,000 banking and investment customers.
Western's chief executive officer, Scott Tannas, said the firm intends to keep its headquarters in High River, and the Desjardins deal will give the operation more muscle to expand its market share. In a statement, Mr. Tannas called Desjardins a "rapidly expanding" member of the Canadian financial services sector.
He added that he expects Western will keep its identity within the Desjardins fold.
"At a time when other smaller financial services companies are being swallowed up in to monolithic corporate entities, our special Western Financial Group brand - a brand with deep roots in the heartlands of Canada - will be maintained and, indeed, enhanced under the Desjardins umbrella," Mr. Tannas said.
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