PrefBlog

Scotiabank has announced:

that Scotiabank has agreed to make an offer for all of the common shares of DundeeWealth that the Bank does not own. Scotiabank currently owns 18 per cent of DundeeWealth.
…
The value of the offer to DundeeWealth shareholders is $21.00 per common share representing an enterprise value for DundeeWealth of approximately $3.2 billion. Scotiabank will offer 0.2497 of a Scotiabank common share and, at the election of each shareholder, either $5.00 in cash or 0.2 of a $25.00, 3.70% five year rate reset Scotiabank preferred share for each DundeeWealth common share (including common shares issuable on conversion of other shares).
…
Dundee Corporation owns 48 per cent of DundeeWealth. As a result of Dundee Corporation’s commitment to tender, on completion of the offer Scotiabank will own at least 67 per cent of DundeeWealth. After the completion of the offer, Scotiabank also expects to proceed with the acquisition of the balance of the common shares of DundeeWealth.

This will improve the credit quality of DW.PR.A quite considerably, and the cash might have an effect on the credit ratings of DC as well. DW.PR.A closed on Friday at 24.95-30, for a yield-to-worst of 4.94-68%, but is now quoted at 26.01-25. The Modified Duration on Friday was 5.38,

It’s interesting that Scotia is offering partial payment in FixedReset preferreds with an initial coupon of 3.70% – that would make the Issue Reset Spread about 150bp, so this issue will be treated as “more perpetual than otherwise”.

Update: DBRS comments:

The transaction is consistent with BNS’s strategy of growing its wealth management businesses, which the Bank believes offers attractive opportunities. DBRS views BNS’s wealth management businesses as a key component of the Bank’s domestic growth strategy.

BNS will gain significant market share to 7.8% and become the fifth largest mutual fund provider in Canada and the third largest among the Canadian banks with over $55 billion in assets under management, up from tenth position. The Bank is currently under-represented in retail mutual funds.

The transaction provides BNS with added capabilities in the advisor channel, which is the primary distribution channel for DWI. Over the last three years, BNS has been investing to strengthen its distribution capabilities in wealth management, including both the direct and advisor channels. Both mutual fund brands, ScotiaFunds and Dynamic, will be maintained.

This entry was posted on Monday, November 22nd, 2010 at 2:02 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.