Bank of Montreal (TSE:BMO, Mkt cap 45.85B, P/E 11.29, Div/yield 0.82/4.60, EPS 6.32, Shares 642.32M) says its acquisition of GE Capital‘s transportation finance business in the United States represents a “unique opportunity” to increase its commercial customer base.
The purchase price of the largest financier to the commercial truck and trailer segment in North America is expected to total around $13 billion, analysts were informed on a conference call last week, the Financial Post reports.
Bill Downe, chief executive of the bank said the assets it will be welcoming into the firm are well aligned with other business segments “in which BMO has proven capability”.
The deal should be wrapped up in the first quarter, bolstering BMO’s earnings and boosting the return on equity of Canada’s fourth-largest bank, Downe told analysts.
The transportation finance business in question is based in Irving, Texas, and operates out of 11 locations in the United States and four in Canada, boasting around 600 employees.
BMO executives anticipate that GE Capital’s management team will stay intact, but refused to discuss retention terms.
“We’re acquiring an excellent organization, one that is operated by the premier management team in the transportation finance industry,” said David Casper, chief executive of BMO Harris Bank.
Dan Clark, the transportation finance unit’s president and general manager, said his team welcomed the prospect of joining BMO.
In terms of the breakdown of the deal, the anticipated asset value on closing would be about $12.55 billion, with about $450 million in goodwill, according to an unnamed Toronto-based analyst. “They are buying hard assets,” he said.
BMO said the purchase price will be funded “primarily through existing balance sheet liquidity, additional deposits and wholesale funding.” No common equity will be issued.
Downe suggested there could be a “pause” in share buybacks as BMO digests the acquisition.
The Bank of Montreal or Banque de Montréal in French is commonly called BMO in either of Canada’s official languages. It is also known as BMO Financial Group. BMO is one of the Big Five banks in Canada. It is the fourth-largest bank in Canada by market capitalization and based on assets, and among the ten largest banks in North America.
Bank of Montreal provides a range of retail banking, wealth management, and investment banking products and services. It conducts its business through three operating groups: Personal and Commercial Banking, Wealth Management and BMO Capital Markets. The Bank operates primarily in Canada and the United States. It also has operations in the UK, Europe, the Caribbean and Asia. BMO serves customers through its wealth management businesses: BMO Nesbitt Burns, BMO InvestorLine, BMO Private Banking, BMO Global Asset Management and BMO Insurance. BMO Capital Markets, its investment and corporate banking and trading products division, provides financial products and services to North American and international clients. In the United States, BMO serves customers through BMO Harris Bank.
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