EQB completes PC Financial deal & adds board chiefs

EQB has completed its acquisition of PC Financial from Loblaw, bringing Galen G. Weston and Richard Dufresne onto EQB's Board of Directors.

The transaction includes President's Choice Bank, PC Financial Insurance Agency, PC Financial Insurance Broker and certain affiliated entities, making PC Bank a wholly owned subsidiary of Equitable Bank.

Under the agreement, EQB bought PC Financial at 1.15 times book value. The consideration included 7.2 million EQB common shares issued to Loblaw and $234.5 million in cash.

The acquisition expands EQB's reach in consumer finance and gives it an exclusive role in financial services for the PC Optimum loyalty programme. The programme has more than 18 million active members, and the enlarged group will serve nearly 4 million Canadians.

Board changes

The deal also reshapes EQB's board. Weston joins while serving as chairman and chief executive officer of George Weston and chairman of Loblaw. Dufresne joins while serving as president and chief financial officer of George Weston and chief financial officer of Loblaw.

Mike Pedersen, Chair of EQB's Board of Directors, said the appointments would support the company's next phase of growth.

"It is a privilege to welcome Galen and Richard to the Board," said Mike Pedersen, Chair of the Board of Directors for EQB. "Their deep expertise leading one of the country's largest and most recognizable companies will be instrumental as EQB executes its focused growth strategy, scaling with purpose and discipline."

Loblaw's equity position in EQB has also increased sharply. Before the transaction closed, Loblaw held 1,220,000 EQB common shares, representing about 3.46% of the issued and outstanding shares.

After closing, Loblaw held 8,457,601 EQB common shares, equal to about 19.89% of EQB's outstanding shares. Under an investor rights agreement, it intends to acquire up to 25% of the issued and outstanding EQB common shares.

Customer impact

For customers, there will be no immediate changes to everyday banking arrangements. PC Bank customers will continue to earn and redeem points in the same way, and the PC Optimum programme will remain owned and operated by Loblaw.

PC Financial's physical footprint also remains intact for now. Its roughly 180 in-store banking pavilions and more than 600 ATMs at Loblaw retail locations that will continue to operate, while EQ Bank customers will continue to use the existing digital banking platform.

In the months ahead, EQB and Loblaw plan conversion work to move PC Bank clients onto the EQ Bank platform. They also plan to introduce new ways for customers to use the combined banking and loyalty network, but did not provide a timetable for those changes.

The expanded relationship gives EQB a deeper link to one of Canada's largest retail groups at a time when banks and consumer businesses are seeking closer ties with loyalty schemes and payments channels. For EQB, which has positioned itself as a challenger in the domestic market, the acquisition adds a sizeable customer-facing franchise with established distribution inside Loblaw stores.

Chadwick Westlake, President and Chief Executive Officer of EQB, described the deal as a broader moment for the lender.

"Today, as we celebrate Canada Day, we mark a turning point for Canadian banking," said Westlake.

"This is about scaling growth to elevate competition - bringing more choice, better value and rewards for everyday Canadians. The next chapter of EQB's evolution as Canada's Challenger Bank starts now."

EQB said its third-quarter results will include one month of earnings contribution from PC Financial. The group has about $150 billion in combined assets under management and administration, and Equitable Bank is its main banking subsidiary.

Loblaw remains Canada's largest retailer, with more than 2,800 locations across grocery, pharmacy and general merchandise. The transaction strengthens its commercial ties with EQB while leaving Loblaw in control of the PC Optimum loyalty scheme and its points value.

The addition of PC Financial brings banking, insurance and store-based distribution into EQB's portfolio, alongside Loblaw as a larger strategic shareholder. Following completion, Loblaw holds just under a fifth of EQB's outstanding common shares.