BNP Paribas revealed today that it has agreed to sell its US-based subsidiary Bank of the West to BMO Financial Group. The transaction, agreed for a total consideration of $16.3 billion in cash, is expected to close in 2022.
The price of Bank of the West is estimated to represent 1.72 times its Tangible Book Value and 20.5% of BNP Paribas market capitalisatio.
BNP Paribas expects the sale of its retail & commercial banking business to generate at closing a one-off capital gain of €2.9 billion.
The French lender detailed that it plans to redeploy the remaining proceeds to improve long-term value creation through acceleration of organic growth, specifically in Europe, targeted investments in technologies and innovative business models, and bolt-on acquisitions in value-added businesses.
Jean-Laurent Bonnafé, BNP Paribas Group Director and Chief Executive Officer, commented:
This is a value accretive transaction for all sides, which emphasizes the quality of Bank of the West franchise. In the name of BNP Paribas, I would like to deeply thank all Bank of the West teams for their achievements and contributions for the development of the Bank.
Moreover, BNP Paribas’ set-up in the United States remains a strategic pillar for the development of our Corporate and Institutional franchise. With this transaction, BNP Paribas also reaffirms its commitment to deliver value to all its stakeholders.
Additionally, BNP Paribas is also planning an ‘extraordinary’ buyback program to compensate shareholders for the expected dilution of earnings-per-share from the acquisition deal. Bank of West contributed approximately 5% of the company’s pre-tax earnings at an average over the past few years.
The official statement said:
As an indication, a share buy-back program of approximately 4 billion euros would fully neutralize the EPS dilution (under current assumptions and based on 17 December 2021 closing share price, that is 56.17 euros). Net of these share buy-backs, the increase in the Group’s CET1 ratio would be of approximately 110 basis points.
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