BY JAMESON BERKOW, FINANCIAL POST OCTOBER 20, 2011 11:07 AM
Scotiabank is expanding its South American footprint with the purchase of Banco Colpatria on Thursday.
Among Canada’s most internationally-focused financial institutions, Scotiabank agreed to purchase 51% of the Colombian retail bank for US$500-million and 10-million Bank of Nova Scotia shares. Expected to close by December, Scotia values the transaction at approximately US$1-billion.
“We are pleased to be partnering with Mercantil Colpatria, a well-established and well-regarded Colombian conglomerate that has successfully led the growth of Banco Colpatria for more than 40 years,” Rick Waugh, President and CEO of Scotiabank, said in a release.
“We look forward to the success we will achieve by combining the unique strengths of our two companies and focusing on our future growth in Colombia.”
Banco Colpatria is Columbia’s fifth largest financial group and the country’s second-largest credit card issuer. As of last month, the bank had US$6.2-billion in assets and US$4.2-billion in deposits.
Scotiabank first entered the Colombian market last year with its acquisition of RBS wholesale banking for an undisclosed amount in March 2010, but has maintained a strong presence in the region since the 1970s. The bank currently has more than 22,000 employees in 820 branches spread across Central and South America.
The acquisition “dovetails quite nicely with [Scotia's] Latin American presence,” John Aiken said in a brief note to clients on Thursday morning. But the Barclays Capital analyst expressed surprise that shares were involved as part of the deal, saying it was the first time in recent history the bank had done so, with the DundeeWealth transaction being the sole exception.
“This may have been a result of the fact that it was a sizeable transaction at roughly US$1-billion versus the roughly US$700-million spent on just under 20% stake in the Bank of Guangzhou,” Mr. Aiken said.
“We view the acquisition positively and believe it incrementally adds to Scotia’s very positive growth profile.”
The strategy, according to Scotia international banking chief Brian Porter, is to use Banco Colpatria’s retail network of 175 branches and 308 ATMs to provide more comprehensive banking services to the approximately 45 million potential customers in the Latin American country.
“Working with our partner’s strong management team we will provide support and expertise to leverage Banco Colpatria’s competencies and accelerate its growth in Colombia,” Mr. Porter said in a release.
“The strengths of their retail business complemented by our wholesale operations in the country will enable Banco Colpatria to service and grow new client segments in the Colombian market.”
Scotia will have the option of purchasing the remaining 49% of Banco Colpatria at a “fair market value” after seven years. The deal will add to Scotia’s earnings for its 2012 fiscal year, the bank said, with a double digit return on invested capital.
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