EQB To Acquire PC Financial And Partner With Loblaw On PC Optimum Program

(RTTNews) - EQB Inc. (EQB.TO) and Loblaw Companies Limited (L.TO) announced that they have entered into a definitive agreement under which EQB will acquire President's Choice Bank (PC Bank), PC Financial Insurance Agency Inc., PC Financial Insurance Brokers Inc., and certain affiliated entities.

As part of the acquisition, EQB will establish a long-term strategic relationship with Loblaw through a commercial agreement, becoming the exclusive financial partner of the PC Optimum loyalty program.

EQB will acquire PC Financial for 1.15x book value at closing, excluding excess capital above a 13% CET1 ratio, for consideration estimated at $800 million. The deal will be financed through the issuance of 7.2 million EQB common shares to Loblaw subsidiaries—representing about 16% of EQB's pro-forma outstanding shares—with the remainder paid in cash.

Prior to closing, and subject to regulatory approval, Loblaw will release and receive approximately $500 million of excess capital and other value from PC Bank, bringing the total value to Loblaw to an estimated $1.3 billion. Upon closing, Loblaw will own at least 17% of EQB's outstanding shares. Closing is expected in 2026, subject to customary conditions and regulatory approvals.

Further, the transaction is expected to be mid-single digit accretive to consensus adjusted earrings per share in the first full year post-closing and to enhance ROE.

The transaction agreement contains a termination right for Loblaw in connection with specified intervening events, including if the EQB board of directors announces a change of control transaction during the interim period. If the Transaction Agreement is terminated following an intervening event, then EQB will be required to pay to Loblaw a termination fee equal to $40 million.

EQB intends to finance the cash consideration with its current balance sheet resources. The Acquisition is not subject to any financing condition or contingency.

In connection with the closing of the Acquisition, EQB and Loblaw will enter into an investor rights agreement pursuant to which Loblaw will have board nomination rights, registration rights and pre-emptive rights, and will be subject to a four-year lock-up and a standstill restricting Loblaw and its affiliates from acquiring common shares of EQB if it would bring Loblaw's ownership above 25% of the issued and outstanding EQB common shares.