ASIANET: BANK OF MONTREAL AND ROYAL BANK OF CANADA ANNOUNCE PLANS FOR A MERGER - newswit
BANK OF MONTREAL AND ROYAL BANK OF CANADA ANNOUNCE PLANS FOR A MERGER OF
EQUALS TO CREATE A CANADIAN-BASED, GLOBALLY COMPETITIVE BANK
TORONTO, Jan. 23 /CNW-PRN-AsiaNetPRN/ - The Board of Directors of Bank ofMontreal and Royal Bank of Canada today announced a definitive agreement,subject to regulatory and shareholder approval, to merge both banking groupsinto a new bank as equal partners.
"This merger will create a Canadian-based, internationally competitive bankwith a strong North American platform which allows us to cost-effectivelydeliver quality products and services to Canadians, and retain high-qualityfinancial service jobs in Canada," said John E. Cleghorn, Chairman and ChiefExecutive Officer, Royal Bank of Canada. "Together, we will have the financialresources, technology and skills to help Canada remain a global leader infinancial services, just as other Canadian-based companies like Nortel, Alcanand Bombardier are leaders in their respective fields."
"With the support of our customers and staff, we have grown into strong andprosperous businesses which have been a symbol of Canadian stability andtrustworthiness for well over a century," said Matthew W. Barrett, Chairmanand Chief Executive Officer, Bank of Montreal. "We cannot be complacent. Pastand present successes are no guarantee of leadership in the future. We owe ourCanadian customers and employees, who have given us a strong franchise, ourvery best efforts to keep it vibrant for the future. Together, we can progressfrom strong Canadian players today to a recognized participant in theincreasingly global financial services industry. We can offer our customers atruly competitive home-based option and our employees rewarding jobs."
Together, the new bank will:
- for customers, continue to provide face-to-face service in communitieswhere the banks currently do so, while investing more than $7 billion over thenext five years in developing state-of-the-art technology for the future. Witha larger customer base and greater technological scale, the new bank will beable to offer personal and business customers better advice, choices, andservice at lower costs;
- for employees, provide more rewarding jobs and personal developmentwith a commitment to invest more than $750 million in training over the nextfive years. The new bank does not anticipate any significant job displacementas a result of this merger. Ongoing turnover at both banks, with retirementsand voluntary departures, together with our leading people management programswill give us the flexibility we need to grow business and create new jobs inthe future;
- for shareholders, the vast majority of whom are ordinary Canadianswhose retirement lifestyle is tied to the success of both banks through theirstock holdings, provide continued strong returns;
- for communities, provide continued strong philanthropic support in theorder of $250 million over the next five years, and a commitment to increaseour total donations as the company's income grows.
The merger is a Canadian response to the sharply rising level of globalcompetition in the financial services market, which is evolving at a rapidpace. Canada's recent successes in improving its fiscal situation, tradeperformance and economic fundamentals, together with its strong economicgrowth and human capital have made it a much more attractive market. Newinternational competitors have been and continue to enter the Canadianmarketplace, joining global giants like Hongkong Bank and Citibank who havealready carved out a significant presence in Canada. For example, U.S. andoverseas competitors such as Wells Fargo & Co., MBNA Corp., Capital OneFinancial Corp., Fidelity, ING, GE Capital Corp. and others have made entriesinto the domestic market recently.
"These international financial services giants threaten to marginalize muchsmaller Canadian banks in the international market, and gain a competitiveadvantage in Canada by applying their greater scale and investments intechnology," said Mr. Cleghorn.
Over the last three years in the U.S., more than $1 trillion, or one-fifth,of banking and thrift assets have been consolidated, creating much strongerand more cost effective North American competitors. Similar consolidation hasand is continuing to take place on a global basis in countries such asSwitzerland, the Netherlands, Germany, and Japan.
The Canadian government for its part has recognized and encouraged the moveto a single global banking market by repeatedly liberalizing entryrequirements for foreign firms, and by signing the recent WTO agreement onfinancial services.
"As new and increasingly larger foreign financial institutions bring thebenefits of their size and technology to the North American marketplace, wewant to ensure that Canadians retain a home-grown choice that can compete withthe best in the world on price, service and innovation," said Mr. Barrett. "Byhaving the headquarters of a worldscale corporation in Canada, we can alsocreate more opportunities for our employees in high-quality jobs, and moreopportunities for employment in the thousands of small and medium-sizedbusinesses that supply us with goods and services."
The merger will help Canada retain a healthy, globally competitivefinancial services industry worthy of a leading economic nation. Personalcustomers of the new bank will be able to choose from a broader array offinancial products through a variety of distribution channels including one ofthe largest branch, ABM and direct banking networks in North America at someof the lowest transaction costs in the world. Together, the new bank willalso have the resources to act as a lead bank for any corporation, and will beable to help Canadian companies increase their exports in more marketsworldwide. Canadians will be able to count on a strong financial partner inCanada and around the globe.
Mr. Cleghorn said, "The new bank brings together proud traditions ofcommunity banking, financial strength, and a remarkable depth of talent acrossmany lines of business. We are creating a new North American bank withtremendous strengths in consumer banking, small business lending, venturecapital, wealth management, corporate and investment banking and electroniccommerce. Our customers will enjoy an unsurpassed standard of convenience,quality of service and value."
The new bank will also help ensure that Canadians continue to share in theeconomic benefits that come from having a major international financialcentre, with head office, research and development, and support jobs based inCanada. The Swiss and Dutch, well aware of these benefits, have movedaggressively to ensure that their banking industries remain strategic assetsin their respective countries.
"In virtually every major developed country, governments are encouragingtheir banks through public policy to consolidate and become more competitiveinternationally in their country's own national interest," said Mr. Barrett."In the U.S. this has resulted in an amazing level of consolidation and thecreation of more globally competitive financial institutions right on ourborder and with designs on expanding their business in Canada."
Under the terms of the agreement, shareholders of Royal Bank of Canada willreceive one common share of the new bank for each common share held. Bank ofMontreal shareholders will receive 0.97 of a common share of the merged entityfor each common share held. This would result in Bank of Montrealshareholders owning 45.1 per cent of the outstanding common shares at the timeof closure, and Royal Bank of Canada shareholders owning 54.9 per cent.
The combined market capitalization of the new bank would be $38 billion.The investment advisors are Nesbitt Burns and Goldman Sachs for Bank ofMontreal and RBC Dominion Securities and Credit Suisse First Boston for RoyalBank of Canada. This transaction, which is a merger of equals, will beaccounted for as a pooling of interests.
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