Surrey Metro, Coast credit unions in deal

Surrey Metro Savings Credit Union has announced a plan to merge with Coast Capital Savings, creating the country's second-biggest credit union with more than $6-billion in assets.

The transaction will lead to Surrey Metro's non-voting shares being delisted from the Toronto Stock Exchange, where it became Canada's only publicly traded credit union in 1992. And it will give Surrey Metro the financial clout that it failed to achieve when shareholders nixed a proposed merger with the former Canada Trust in 1999.

"We are very happy that the last [proposed merger]was blocked and that we have the opportunity to promote this one instead," Surrey Metro board chairman Tom Kirstein said yesterday.

"When the Canada Trust proposal was denied by members, they clearly said that if you are going to merge in the future, do it with another credit union, and if you can, delist the shares of the TSE shareholders."

But some shareholders are already questioning the deal's terms. As part of the proposed merger, Coast Capital will buy Surrey Metro's non-voting shares at $21 a share. The shares closed Monday at $17.40 on the TSE, were halted briefly yesterday pending the merger announcement, then shot up $2.80 to close at $20.20.

The deal must be approved by 66.6 per cent of Surrey Metro members, as well as the holders of its non-voting shares.

Irwin Michael, president of Toronto-based I.A. Michael Investment Counsel, has purchased Surrey Metro shares for two mutual funds, which together hold almost 12 per cent of the credit union's publicly traded shares.

Although he supports Surrey Metro's move to privatize its shares, Mr. Michael questioned the deal's valuation. "Canada Trust was willing to pay $24 three years ago," he said. Since then, the company's book value has increased by at least 50 per cent. "The company has made excellent strides in the last three years, and yet you're getting $3 less than you were getting three years ago."

If it goes ahead, the deal between Coast Capital and Surrey Metro will be the latest in a string of mergers and acquisitions that have chopped the number of credit unions in British Columbia almost in half over the past decade, to 65 institutions.

Coast Capital is itself the product of a merger in December, 2000, between Richmond Savings and Pacific Coast Savings credit unions.

The combined company, to be known as Coast Capital Savings Credit Union, would have 2,000 employees and almost 300,000 members.

Mr. Kirstein said the merger is designed to allow both facilities to compete with big banks, but that the credit union has no plans to operate outside of British Columbia.

Surrey Metro members and non-voting shareholders are scheduled to vote on the proposed merger in May.

Coast Capital members are not required to vote on the deal because it is a transfer of assets from Surrey Metro to Coast Capital.

If all approvals are received, the merger is scheduled to close at the end of June.

Vancouver City Savings Credit Union is Canada's largest credit union with assets of $7-billion.