Credit: Shutterstock photoThe merger deal of Toronto-based Royal Bank of CanadaRY and U.S.-based City National CorporationCYN received the Federal Reserve's approval on Oct 7. The acquisition of City National by Royal Bank of Canada announced in January 2015 is yet to meet certain customary closing conditions. After formalities, the stock-cash deal is expected to be completed on Nov 2, 2015.
Terms of the Deal
Per the terms of the transaction, City National shareholders have the option of either receiving shares or cash. The shares will be entitled at an exchange ratio of 0.7489 shares of Royal Bank of Canada common stock for each City National share and $47.25 in cash. Notably, cash or stock option is subject to the overall value of the deal, which is $2.7 billion in cash and about 44 million shares, depicting 50% each. Notably, the deal value stands at approximately $5.4 billion or $93.80 per share of City National as announced in January.
Upon closure of the deal, the U.S. Wealth Management unit of Royal Bank of Canada will be combined with City National with City National Chairman and CEO Russell Goldsmith leading as the manager. The new unit will be part of the global RBC Wealth Management segment.
In the second half of the third year, the deal is anticipated to be accretive to earnings per share (before amortization of intangibles)..
Bottom-Line
City National acquisition is a strategic fit for Royal Bank of Canada. The completion of the deal is expected to open up significant opportunities for Royal Bank of Canada to augment its top line by leveraging on City National's high net worth and commercial clients' network as well as expanding its franchise in the U.S.
Currently, Royal Bank of Canada carries a Zacks Rank #5 (Strong Sell), while City National has a Zacks Rank #4 (Sell). A couple of better-ranked stocks in the finance space include First Financial Bancorp. FFBC and Wintrust Financial Corporation WTFC . Both the stocks sport a Zacks Rank #2 (Buy).
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CITY NATIONAL (CYN): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
