Canadian Tire re-acquires Scotiabank’s 20% in Canadian Tire Financial Services

CPE News

CPE News (11.1.2023) – Canadian Tire Corporation, Limited (TSX: CTC) (TSX: CTC.A) has completed the repurchase of Scotiabank’s 20% stake in Canadian Tire Financial Services (CTFS) in an all-cash transaction, valued at $895 million.

Scotiabank will be recording an after-tax gain of approximately $319 million in its fourth quarter 2023 earnings. Scotiabank will continue to provide a committed credit facility of $1.1 billion to CTFS for the next 18 months.

Canadian Tire said the full owner of CTFs will enhance its flexibility in delivering added value to its more than 11 million active loyalty members, including its 2.3 million credit card holders. CTFS plays a pivotal role in the Triangle Rewards loyalty program, representing approximately 75% of all Canadian Tire Money issued to members annually.

Canadian Tire Financial Services includes operations of Canadian Tire Bank and CTFS Bermuda Ltd, a Bermuda reinsurance company.

On October 1, 2014, Scotiabank acquired a 20% interest in CTFS from Canadian Tire for $476.8 million.

photo credit: Canadian Tire

News Release

Canadian Tire Corporation to accelerate the growth of Triangle Rewards with strategic repurchase of Financial Services business stake from Scotiabank

Toronto, October 31, 2023 – Canadian Tire Corporation, Limited (TSX: CTC) (TSX: CTC.A) (“CTC” or “the Company”) today announced that it has completed the repurchase of Scotiabank’s 20% stake in Canadian Tire Financial Services (“CTFS”). This all-cash transaction, valued at $895 million, restores CTC’s full ownership of its financial services arm. The transaction will enhance CTC’s flexibility in delivering added value to its more than 11 million active loyalty members, including its 2.3 million credit card holders. CTFS plays a pivotal role in the Company’s Triangle Rewards loyalty program, representing approximately 75% of all Canadian Tire Money (“eCTM”) issued to members annually.

Triangle Rewards is a cornerstone of CTC’s Better Connected strategy, driving significantly higher sales per member and sustained growth over time. Engaged Triangle Rewards members spend, on average, more than twice as much as non-members, and those with a Triangle credit card represent some of CTC’s most valued and engaged customers.

“This move enables us to expedite key elements of our Triangle Rewards strategy to stay relevant to customers’ changing needs and expand our credit card program to unlock even greater value for shareholders,” said Greg Hicks, President and CEO.

Mr. Hicks added, “Loyalty rewards programs, and their integration with financial institutions have evolved significantly since our original deal with Scotiabank. We have invested heavily in Triangle Rewards, and Scotiabank has done the same with its coalition loyalty program. While we have appreciated partnering with Scotiabank over the past decade, with both Scotiabank and CTC having received significant strategic and financial benefits, concluding this partnership will give us much greater control and flexibility in building out our loyalty program. Accelerating issuance of eCTM, including through opportunities with new partners such as Petro-Canada, is key to driving value for members in a rapidly evolving loyalty marketplace.”

CTC will evaluate strategic alternatives for its financial services business to be undertaken with Goldman Sachs as the company’s financial advisor during 2024. Consideration will be given to the optimal ownership structure of the CTFS business and to driving sustainable value in the Triangle Rewards program and credit card portfolio, building on CTFS’ strong track record of long-term growth.

Since 2014, the number of Triangle credit cardholders has increased from 1.8 million to 2.3 million and receivables have grown by more than 60% to approximately $7.1 billion at the end of Q2 2023. In 2022, the financial services business ranked as Canada’s seventh largest issuer of credit cards by receivables outstanding, generating $442 million of income before income taxes.

Scotiabank will continue to provide a committed credit facility of $1.1 billion to CTFS for the next 18 months.

CTC will record a charge of $328 million related to the transaction, equating to $5.88 per share, which will be reflected in the Company’s Q3 2023 results. The transaction will be accretive to normalized earnings in 2024.

The $895 million consideration will be funded by CTC’s existing short-term funding channels, supplemented by a $400 million, 18-month term loan from Desjardins Capital Markets.

FORWARD-LOOKING STATEMENTS
This press release contains forward-looking information within the meaning of applicable securities laws, which reflects management’s current expectations regarding the repurchase of Scotiabank’s 20% interest in CTFS (the “Repurchase”) and future events. All statements other than statements of historical facts contained in this press release may constitute forward-looking information, including, but not limited to, statements concerning: the expected benefits of the Repurchase, including with respect to CTC’s ability to expedite its Triangle Rewards strategy, expand its credit card program, deliver added value to its loyalty members (including through an acceleration of the issuance of eCTM); CTC’s intention to evaluate strategic alternatives for its financial services business; Scotiabank’s continued provision of banking services to CTFS; the accounting treatment of the Repurchase; and the impact of the transaction on 2024 normalized earnings. CTC has provided these forward-looking statements for the purpose of presenting information about management’s current expectations and plans relating to the Repurchase and readers are cautioned that these statements may not be appropriate for other purposes. Forward-looking statements are based on the reasonable assumptions, estimates, analyses, beliefs and opinions of management, made in light of its experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable at the date that such statements are made. Forward looking information is necessarily subject to a number of business, economic, competitive and other risk factors that could cause actual results to differ materially from management’s expectations and plans as set forth in such forward-looking information. For information on the material risk factors and uncertainties and the material factors and assumptions applied in preparing the forward-looking information that could cause the Company’s actual results to differ materially from predictions, forecasts, projections, expectations or conclusions, refer to section 10.0 (Key Risks and Risk Management) of the Company’s Q2 2023 MD&A as well as CTC’s other public filings, available at https://www.sedarplus.ca and at https://investors.canadiantire.ca. The Company does not undertake to update any forward-looking information, whether written or oral, that may be made from time to time by it or on its behalf, to reflect new information, future events or otherwise, except as is required by applicable securities laws.

ABOUT CANADIAN TIRE CORPORATION

Canadian Tire Corporation, Limited, (TSX: CTC.A) (TSX: CTC) or “CTC”, is a group of companies that includes a Retail segment, a Financial Services division and CT REIT. Our retail business is led by Canadian Tire, which was founded in 1922 and provides Canadians with products for life in Canada across its Living, Playing, Fixing, Automotive and Seasonal & Gardening divisions. Party City, PartSource and Gas+ are key parts of the Canadian Tire network. The Retail segment also includes Mark’s, a leading source for casual and industrial wear; Pro Hockey Life, a hockey specialty store catering to elite players; and SportChek, Hockey Experts, Sports Experts and Atmosphere, which offer the best active wear brands. The Company’s 1,700 retail and gasoline outlets are supported and strengthened by CTC’s Financial Services division and the tens of thousands of people employed across Canada and around the world by CTC and its local dealers, franchisees and petroleum retailers. In addition, CTC owns and operates Helly Hansen, a leading technical outdoor brand based in Oslo, Norway. For more information, visit Corp.CanadianTire.ca.

FOR MORE INFORMATION

Media: Stephanie Nadalin, (647) 271-7343, stephanie.nadalin@cantire.com
Investors: Karen Keyes, (647) 518-4461, karen.keyes@cantire.com