(Bloomberg) -- National Bank of Canada is raising an additional $20 million in connection with its planned acquisition of Canadian Western Bank, according to people familiar with the matter.
The Montreal-based lender struck a deal last month to buy Canadian Western in an all-stock transaction valued at $5 billion at the time. It said it would issue about $1 billion of new equity, with half of that coming through a private placement with pension manager Caisse de Depot et Placement du Quebec.
The rest, a total of $500 million, was done through a bought-deal offering at $112.30 per subscription receipt that closed on June 17. Now, a month later, National is planning to sell an additional 178,000 subscription receipts at the same price. The trade is likely to be announced Wednesday, said the people, who asked not to be named because the matter is still private.
The possibility of an additional equity raise — known as an over-allotment — is often announced at the same time as the initial sale of shares. Assuming there’s enough demand, the underwriting banks can sell more of the stock to fund managers and other clients than they’ve bought, which gives the banks a temporary short position. The banks can then exercise the over-allotment to cover that short.
“Demand for the initial offering was stronger than expected,” National Bank spokesperson Alexandre Guay said by email on Tuesday. He didn’t comment on the specifics but said that the bank has previously indicated that it granted underwriters, as well as the Caisse, an over-allotment option which they could choose to exercise.
National’s stock price tumbled below $110 the day after the CWB deal was announced and below $107 by the end of that week. It has since bounced back and closed at $111.15 in Toronto on Tuesday, while the subscription receipts closed just below $110.
The receipts are listed on a separate ticker on the Toronto Stock Exchange and will be converted to common shares of National Bank when the CWB transaction closes, which is expected by the end of next year if regulators approve it.
The syndicate of underwriters includes all of Canada’s Big Six banks and a number of other financial institutions including Barclays Plc. Canadian Imperial Bank of Commerce “participated in the structuring and pricing of the offering” as lead, according to a regulatory filing by National Bank.
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