Canadian Western Bank
TSX : CWB

Canadian Western Bank

December 21, 2015 13:31 ET

CWB to Acquire the Businesses of the Maxium Group of Companies

EDMONTON, ALBERTA--(Marketwired - Dec. 21, 2015) - Canadian Western Bank Group (TSX:CWB) (CWB Group or CWB) is pleased to announce an important step in its growth and diversification strategy with the execution of a definitive agreement to acquire the business of Maxium Financial Services Inc. (Maxium) and Desante Financial Services Inc. (Desante), together referred to as "Maxium Group". The purchase agreement is structured over three years with maximum total consideration of up to $120 million. The acquisition will be funded at closing with $30 million of CWB common shares - issued at a 20-day volume weighted average price (VWAP) of $23.99 per share - and $19.5 million of cash. Remaining consideration consists of contingent payments that will total up to $70.5 million. Contingent payment installments will be made annually with determination of the total amount payable based on Maxium Group's cumulative business performance over a 36-month purchase price adjustment period. Up to 50% of the total contingent consideration may be settled with CWB shares, provided the share price at the time of issuance exceeds $30, with the remainder to be paid in cash. The closing date is expected in the first calendar quarter of 2016, subject to regulatory approvals and other conditions of closing, including the approval of the Office of the Superintendent of Financial Institutions and the Toronto Stock Exchange.

Founded in 1993, Maxium Group is a privately held financing company providing loans, equipment leases and structured financing solutions to more than 35,000 clients, with the majority of business in Ontario. As at September 2015, Maxium Group's securitized lending assets totaled approximately $1.0 billion, represented by a diversified portfolio in specialized areas of health care, golf, transportation, real estate, and general corporate financing. Existing Maxium Group shareholders will retain the assets currently securitized, with on-balance sheet lending assets acquired by CWB at the closing date expected to be less than $100 million. CWB forecasts total on-balance sheet loans and leases of Maxium Group will surpass $1.0 billion in the third year after the closing date.

"We are excited to welcome the teams of Maxium and Desante to the CWB Group," said Chris Fowler, President and Chief Executive Officer of CWB. "Maxium Group targets niche lending markets which provide attractive returns on capital and are complementary to our branch and National Leasing verticals. This acquisition brings an experienced and motivated team of employees, led by a highly respected management group with a demonstrated history of delivering consistently strong financial performance, including solid credit quality. As we've said in the past, our primary criteria when evaluating acquisitions are alignment with CWB's strategic direction, accretive growth potential and a good fit with our culture, and this opportunity is well aligned with each of these key points."

"The impact on CWB's adjusted earnings per common share over the first two years following the closing date is expected to be relatively neutral; however, the future potential is significant as assets and earnings contributions grow through a combination of new originations and renewals of existing business," added Mr. Fowler. "Addition of the Maxium Group management team, employees and valued long-term customers, will accelerate our capabilities and capacity to expand our geographic footprint with more of our core business based in Central and Eastern Canada. It will also broaden our business mix within desired niche markets and provide new cross-selling opportunities across the CWB Group. The combination of Maxium Group's strong originations, yields and good credit performance with CWB's position as a Schedule 1 bank is expected to provide significant synergies over time. We believe by the fifth year this business has the potential to contribute as much as 10% of CWB Group's consolidated earnings. This is similar to our experience with the 2010 acquisition of National Leasing which now represents a significant portion of annual earnings. We are very excited about the current and future opportunities of the Maxium Group acquisition."

"This is a tremendous opportunity for our business teams to join forces with a respected financial institution that we have come to know well over the past number of years," added Paul McLean, Chief Executive Officer and founding partner of Maxium Group. "Becoming part of the CWB Group significantly expands our funding capabilities and access to capital, and provides additional resources to help us achieve our full potential. Ultimately, we expect this partnership will facilitate our ambitions to help more customers, in more ways, and take us to another level of service, performance and growth. We look forward to our part in further building CWB's profile across the country, particularly in Ontario where we currently have more than 40 employees and over 80% of our business."

Maxium Group will continue to operate as a stand-alone business headquartered in Richmond Hill, Ontario. The transition of business assets is expected to be seamless with no disruption to the clients of either Maxium Group or CWB.

Given the purchase structure, the transaction is not expected to have a material impact on CWB's consolidated adjusted earnings per common share until new originations and renewals begin to build a larger base of on-balance sheet assets supported by CWB's funding capabilities. Meaningful positive contributions to adjusted earnings per share are expected to begin in year three, and accelerate thereafter. CWB maintains strong regulatory capital ratios, as calculated under the Standardized approach, and the pro forma impact at closing is expected to reduce all regulatory capital ratios by approximately 10 basis points. The deductions from regulatory capital for goodwill and intangible assets, and the addition of incremental risk-weighted assets, will be supported by the common shares issued upon closing, along with recent business initiatives resulting in lower overall capital requirements for CWB's existing pool of securitized assets.

About CWB Group

Canadian Western Bank offers a full range of business and personal banking services across the four western provinces and is the largest publicly traded Canadian bank headquartered in Western Canada. CWB, along with its material operating affiliates and divisions, National Leasing, Optimum Mortgage, Canadian Western Trust, Canadian Western Financial, CWB Wealth Management, Adroit Investment Management, McLean & Partners Wealth Management, and Canadian Direct Financial collectively offer a diversified range of financial services across Canada and are together known as the CWB Group. CWB's common shares and Series 5 preferred shares are listed on the Toronto Stock Exchange under the trading symbols "CWB" and "CWB.PR.B", respectively. Refer to www.cwb.com for additional information.

About Maxium and Desante

Maxium is one of Canada's largest privately-held financing companies with a portfolio of approximately $1 billion. Founded in 1993, Maxium offers creative financing to approximately 35,000 customers by identifying and refining customized financial solutions which respond directly to their specific needs. Through a coordinated strategy of targeting customers and vertical markets currently underserviced by traditional lenders, Maxium has earned a reputation for its innovative lending solutions, coupled with an unparalleled ability to build long-term relationships. These relationships develop through a commitment to mutual success benefiting from a distinct competitive edge based on speed, flexibility and an entrepreneurial approach. Refer to www.maxium.net for additional information.

Desante is a healthcare financial solutions company that provides business funding up to $10 million to healthcare professionals. Desante's customers work with a talented team of professionals to cut through complex issues and close the deal. Our highly experienced professionals specialize in pharmacy, dental, optometrist, veterinarian, physician and nursing home financing. We are a reliable source of funds to customers across Canada. Refer to www.desante.ca for additional information.

Forward-looking Statements

From time to time, CWB makes written and verbal forward-looking statements. Statements of this type are included in the Annual Report and reports to shareholders and may be included in filings with Canadian securities regulators or in other communications such as press releases and corporate presentations. Forward-looking statements include, but are not limited to, statements about CWB's objectives and strategies, targeted and expected financial results and the outlook for CWB's businesses or for the Canadian economy. Forward-looking statements are typically identified by the words "believe", "expect", "anticipate", "intend", "estimate", "may increase", "may impact", "goal", "focus", "potential", "proposed" and other similar expressions, or future or conditional verbs such as "will", "should", "would" and "could".

By their very nature, forward-looking statements involve numerous assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that management's predictions, forecasts, projections, expectations and conclusions will not prove to be accurate, that its assumptions may not be correct and that its strategic goals will not be achieved.

A variety of factors, many of which are beyond CWB's control, may cause actual results to differ materially from the expectations expressed in the forward-looking statements. These factors include, but are not limited to, general business and economic conditions in Canada, including the volatility and level of liquidity in financial markets, fluctuations in interest rates and currency values, the volatility and level of various commodity prices, changes in monetary policy, changes in economic and political conditions, legislative and regulatory developments, legal developments, the level of competition, the occurrence of natural catastrophes, changes in accounting standards and policies, the accuracy and completeness of information CWB receives about customers and counterparties, the ability to attract and retain key personnel, the ability to complete and integrate acquisitions, reliance on third parties to provide components of business infrastructure, changes in tax laws, technological developments, unexpected changes in consumer spending and saving habits, timely development and introduction of new products, and management's ability to anticipate and manage the risks associated with these factors. It is important to note that the preceding list is not exhaustive of possible factors.

Additional information about these factors can be found in the Risk Management section of CWB's annual Management's Discussion and Analysis (MD&A). These and other factors should be considered carefully, and readers are cautioned not to place undue reliance on these forward-looking statements as a number of important factors could cause CWB's actual results to differ materially from the expectations expressed in such forward-looking statements. Unless required by securities law, CWB does not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time by it or on its behalf.

Assumptions about the performance of the Canadian economy over the forecast horizon and how it will affect CWB's businesses are material factors considered when setting organizational objectives and targets. In determining our expectations for economic growth, we primarily consider economic data and forecasts provided by the Canadian government and its agencies, as well as an average of certain private sector forecasts. These forecasts are subject to inherent risks and uncertainties that may be general or specific. Where relevant, material economic assumptions underlying forward-looking statements are disclosed within CWB's 2015 Annual Report to Shareholders, including the MD&A, available on SEDAR at www.sedar.com and CWB's website at www.cwb.com.

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