Royal Bank of Canada (RBC) has signed a merger agreement to acquire the US-based private and commercial bank City National in a transaction worth about $5.4bn.
RBC will pay the aggregate consideration with about $2.7bn in cash and about 44 million RBC common shares, which represents 50% cash and 50% share mix.
RBC president and CEO Dave McKay said: "In line with RBC’s strategic goals, we believe this combination creates a powerful expansion platform for focused long-term growth in the country which we view as our second home market.
"City National’s private banking and wealth management capabilities will enable us to offer a broader product suite to the 340,000 U.S. households served by our U.S. Wealth Management unit."
Upon concluding the transaction, RBC will combine its US Wealth Management unit with City National, and the unit will be reported as part of the global RBC Wealth Management segment.
City National chairman and CEO Russell Goldsmith said: "This combination is a compelling opportunity. It will deliver significant value to our shareholders along with the opportunity to participate in the future growth of RBC.
"It will promote both continuity and growth, enabling our outstanding team of colleagues to maintain and strengthen City National’s value proposition."
The total value of the consideration to be received by City National common stockholders upon the closing of the transaction will be based in part on the value of RBC common shares at closing.
Subject to customary closing conditions, the transaction is expected to be accretive to earnings per share in the latter part of year three and accretive to earnings in year two.
The transaction, which is also subject to conditions such as receipt of required regulatory approvals and the approval of City National’s common stockholders, is expected to close in the fourth calendar quarter of 2015.
City National serves high net worth as well as commercial clients across various metropolitan areas, including New York, Los Angeles, the San Francisco Bay Area and Orange County in the US.
Image: Royal Bank of Canada building in Toronto, Ontario. Photo: courtesy of Royal Bank of Canada