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RBC expands US wealth management business with $5.4 bln City National purchase

Last updated: 15:27 22 Jan 2015 GMT, First published: 16:27 22 Jan 2015 GMT

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Royal Bank of Canada (TSE:RY) (NYSE:RY) is acquiring Los Angeles-based City National Corp (NYSE:CYN) in a a cash and share deal valued at US$5.4 billion, as the Canadian bank bolsters its efforts to grow its wealth management business in the US.

RBC will pay about $47.25 in cash and 0.7489 of a common share for each share of City National. The deal is valued at an equivalent of $93.8 per City National share, based on RBC's closing price on January 21.

RBC will pay up to $2.7 billion in cash and about 44 million common shares, it said, which is roughly half in cash and half in Royal Bank shares.

"In line with RBC's strategic goals, we believe this combination creates a powerful expansion platform for focused long-term growth in the country which we view as our second home market," said president and chief executive Dave McKay, in a release.

"City National serves high-net-worth and commercial client segments in select high-growth markets, and represents a unique opportunity to complement and enhance our existing U.S. businesses and product offering."

In the US, RBC employs some 8,000 people, including more than 3,000 in New York. It has the eighth largest wealth management firm in the US.

RBC's McKay said on a conference call with investors Thursday that City National is strategically positioned in the largest and most attractive US markets, including New York, Los Angeles and the San Francisco Bay area.

City National's chairman and CEO Russel Goldsmith will remain in his position following the deal, and will also be in charge of RBC's US wealth management unit, which has about 340,000 US households as clients. 

"This combination is a compelling opportunity. It will deliver significant value to City National shareholders along with the opportunity to participate in the growth of RBC," said Goldsmith.

Both boards have already agreed to the deal, but the transaction still requires various approvals from regulators as well as City National shareholders.

The acquisition is expected to add to RBC's earnings per share in the latter part of year three, and accretive to earnings in year two, it said.

The deal is anticipated to close before the end of this year.

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