Canadian financial services firm Equitable Group Inc (TSX: EQB) has entered into a private placement deal with the Ontario Municipal Employees Retirement System (OMERS). The deal will see OMERS acquire common shares of the firm that generate total proceeds of up to $50 million. As a result, the pension fund will hold about 4.9 percent of Equitable’s issued and outstanding shares. Equitable intends to use the net proceeds to invest in its subsidiary, Equitable Bank, a Toronto-based provider of residential lending, commercial lending and savings solutions across Canada.
Equitable Group Enters into Agreement with OMERS for $50 Million Common Share Private Placement
TORONTO, Dec. 12, 2016 /CNW/ – Equitable Group Inc. (TSX: EQB and EQB.PR.C) (“Equitable” or the “Company”) announced today that it has entered into an agreement with OMERS, the pension plan for Ontario’s municipal employees, for a private placement of common shares of the Company (“Shares”) at a price of $61.76 per Share, for aggregate proceeds of up to $50 million (the “Private Placement”).
Under the agreement, OMERS will acquire 809,585 Shares which represents approximately 4.9% of the issued and outstanding Shares of the Company after giving effect to the Private Placement (on an undiluted basis). Shares issued under the Private Placement will be subject to the required four month hold period from the date of closing. The closing of the Private Placement is subject to, among other things, acceptance from the Toronto Stock Exchange and customary closing conditions. The Private Placement is expected to close before the end of the calendar year.
The Company intends to use the net proceeds of the Private Placement to invest in common shares of its wholly owned subsidiary, Equitable Bank (the “Bank”). Subject to the approval of the Office of the Superintendent of Financial Institutions, this investment will increase the Bank’s Common Equity Tier I capital and provide it with more capacity to fund the growth of its lending businesses. Management expects that the investment will increase the Bank’s Common Equity Tier I capital ratio by approximately 0.8%. Even with this issuance, management expects to deliver a high return on equity in 2017.
“Equitable achieved an annualized growth rate in assets under management of 25% as at the end of the third quarter of 2016. With demand for both our core single family and commercial business lines exceeding our expectations in recent quarters, and with what we believe to be meaningful growth opportunities ahead, it is prudent to add new capital beyond what we are generating internally. And now is the right time for a transaction.” said Andrew Moor, President and CEO of Equitable. “This investment from a highly regarded institution will allow us to take advantage of even more opportunities in our lending businesses while maintaining our strong capital ratios and is an important endorsement of Equitable Bank’s position as a customer focused branchless bank.”
These growth opportunities are expected to mirror the quality of the current portfolio. As stated in its third quarter 2016 Management Discussion and Analysis, Equitable believes that the credit quality of its mortgage portfolio remains high. Management continues to expect that arrears rates and credit loss provisions will be low over the next several quarters, assuming that Canadian economic conditions stay within the range of broad market expectations.
TD Securities Inc. acted as the sole agent to Equitable in connection with the Private Placement.
ABOUT EQUITABLE GROUP
Equitable Group Inc. is a growing Canadian financial services business that operates through its wholly-owned subsidiary, Equitable Bank. Equitable Bank is Canada’s ninth largest independent Schedule I bank and offers a diverse suite of residential lending, commercial lending and savings solutions to Canadians. Through its proven branchless approach and customer service focus, Equitable Bank has grown to over $21 billion of Assets Under Management. Most recently, Equitable Bank launched a digital banking operation, EQ Bank, along with its flagship product the EQ Bank Savings Plus Account. Equitable Bank currently employs nearly 600 employees across the country, and was named one of Canada’s best employers for 2017 by Aon. For more information about Equitable Bank and its products, please visit equitablebank.ca.
For further information: Andrew Moor, President and Chief Executive Officer, 416-515-7000; Tim Wilson, Vice President and Chief Financial Officer, 416-515-7000
Photo courtesy of Reuters/Chris Helgren