On Wednesday, BMO Capital revised its position on… Western Canadian Bank (TSX::CN) (OTC: CBWBF), downgraded the stock from outperform to market perform, while simultaneously raising its price target to C$52.00 from C$35.00.
This review follows the announcement on Tuesday that Canadian Western Bank has entered into an agreement to be acquired by National Bank of Canada (OTC:) (NA-TSX; Restricted) in an all-stock deal.
The deal, which values Canadian Western Bank at about C$5 billion, is contingent on regulatory approvals and the support of at least two-thirds of CWB's shareholders.
The terms of the agreement outline a fixed exchange ratio, whereby each CWB common share will be exchanged for 0.450 of a National Bank common share. The arrangement entails a roughly 110% premium over Canadian Western Bank's closing price on Tuesday, putting the bank's value at 1.41 times its book value.
The acquisition, if completed, will result in Canadian Western Bank shareholders receiving a significant premium on their investment relative to the bank's most recent closing price.
The premium reflects the value National Bank of Canada sees in merging with Canadian Western Bank, a move that is likely to reshape the competitive landscape within the Canadian banking sector.
BMO Capital's new target price of C$52.00 reflects the expected value of Canadian Western Bank's shares following the acquisition, consistent with the terms and premiums offered in the proposed transaction.
As the market awaits the completion of this acquisition, the downgrade to market performance suggests a neutral perspective on the stock's near-term growth potential, given the pending changes in ownership and structure.
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