CIBC World Markets is putting up a big chunk of balance sheet to help Intact Financial with its $2.6-billion purchase of AXA Canada.
CIBC, the sole adviser to Intact on the transaction, is co-leading with TD Securities a bought deal of almost $1-billion on the equity side, as well as providing a fully underwritten $1.3-billion credit facility.
It's a lot of money committed to one client, but then Intact has paid a lot of fees to CIBC over the years.
Intact has been part of a long and fruitful relationship for CIBC, which was one of the lead banks when the company went public in a $1-billion IPO at the end of 2004. At that point, the company was known as ING Canada.
In 2009, ING Canada's Dutch parent unveiled plans to sell about $2-billion of stock in the Canadian company. The deal was done in two chunks, one sale to the public and one to institutional investors. CIBC had leading roles on both. It was after that that the insurer changed its name to Intact.
For the AXA deal, Intact plans to use $500-million of its own capital, plus the proceeds from the equity offering and the loan package.
On the equity side, Intact will sell 17.5-million subscription receipts for proceeds of $836-million. That works out to about $800-million after commissions, Intact said, giving a sense of the payday for CIBC and TD. The subscription receipts will be redeemable for one common share of Intact after the AXA deal closes.
There's also an option for the underwriters to buy an addition 2.6 million shares, taking the value of the equity raised to almost $1-billion.
The credit facilities from CIBC are unsecured. Intact said it plans to replace some of that with medium term notes and preferred shares, likely generating more business for CIBC.