ECN Capital to sell Canadian C&V Finance Assets to CWB for $900M

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By Ted Liu

ECN Capital Corp. (TSX: ECN) has entered into a definitive agreement with Canadian Western Bank (TSX: CWB) to sell all of its Canadian Commercial and Vendor (C&V) Finance assets for cash proceeds of approximately $900 million, representing a $2 million premium to book value (exclusive of goodwill, break and other costs totaling approximately $10 million after tax).

The transaction is subject to customary approvals and is expected to close in the first quarter of 2018. This transaction will free up approximately $180 million in equity capital for redeployment in furthering of ECN Capital’s ongoing strategic plan.

In conjunction with the previously announced sale of its U.S. C&V Finance business, the current transaction to sell all the Canadian C&V Finance assets results in total cumulative proceeds of approximately $2.96 billion for a combined premium of approximately $215 million on net assets. On April 3, 2017, ECN Capital completed the sale of its US Commercial and Vendor (C&V) Finance business to PNC Financial Services Group (NYSE: PNC) for US $1.253 billion. The US C&V Finance business included approximately US $1.075 billion of total assets.

“This transaction will enable these assets to continue producing strong results under the ownership of a leading Canadian bank. For ECN, this marks another successful step in validating book value and the execution of our strategic plan,” said Jim Nikopoulos, ECN Capital’s President. “The successful dispositions have supported our strategy to transition from a balance sheet lender to asset light specialty finance businesses as evidenced by the recent Service Finance and Triad Financial transactions.”

“The successful execution to sell all of the Canadian C&V assets brings an end to harvesting assets and has positioned us well to continue to execute on our strategic plan,” said Steve Hudson, ECN Capital’s CEO.

BMO Capital Markets and Macquarie Capital acted as financial advisors on the transaction for ECN Capital. Blake Cassels & Graydon LLP advised the ECN on the transaction.

“This is a highly accretive and strategic portfolio acquisition for CWB, and an excellent capital deployment opportunity,” said Chris Fowler, CWB’s President and Chief Executive Officer. “The client base is a good fit with our strategic priorities, and provides us with valuable prospects to pursue future growth. We have a well-established specialization in equipment financing and leasing and this portfolio is fully aligned, with the yields and security types generally comparable to our existing business. With approximately 75% of the portfolio originated outside of Western Canada, this will also move us toward our strategic goal to grow CWB’s Ontario exposures to a third of our total. We expect strong financial contributions from these assets to contribute meaningfully to performance against our medium-term performance targets. That said, the acquired portfolio has a relatively short, approximately two-year weighted average duration. As such, the magnitude of the impact will depend on our ability to quickly leverage the growth opportunities available to us. We’re confident that our strong teams will continue to build on the quality relationships previously established by ECN.”

photo credit: ECN Capital Corp.