TWO BANKS TEAM UP TO CREATE ONE MEGA-BANK
By Adnews Staff
Two Canadian banks have announced their plans to merge to combat international competition. The Bank of Montreal and the Royal Bank of Canada have signed an agreement to merge the two banks. "As new and increasingly larger foreign financial institutions bring the benefits of their size and technology to the North American marketplace, we want to ensure that Canadians retain a home-grown choice that can compete with the best in the world on price, service and innovation," Bank of Montreal chairman and CEO Matthew Barrett says in a release. Under the deal, shareholders of the Royal Bank will receive one common share of the newly created bank for each common share held. Bank of Montreal shareholders will receive .97 of a common share of the merged entity for each common share held. This will result in the Bank of Montreal shareholders owning a 45.1% share of the bank, while the Royal Bank shareholders will hold a 54.9% stake. The deal is subject to regulatory and shareholder approval. Federal Finance Minister Paul Martin will not make a ruling until after the Task Force on the Future of the Canadian Financial Services Sector releases its report. That will not happen until at least September. Bank of Montreal spokesperson Lynne Kilpatrick told Adnews last week that the banks will make decisions on how the two will operate the new bank as the merger gets closer to being finalized. She said it was too early to say what name the new bank will operate under and who will handle advertising for the bank. Advertising for the Bank of Montreal is done by Vickers & Benson Advertising of Toronto. The Gingko Group of Toronto handles advertising for the Royal Bank. Barrett says the new bank will offer customers a broader range of financial products through a variety of distribution channels. It will also have the resources to act as a lead bank for corporations and will be able to help Canadian companies increase their exports in more markets around the world. The combined capitalization of the new bank would be $38 million. It will rank in the top 10 in North America and the top 25 in the world for market capitalization. Based on fiscal 1997 year-end, the bank would have generated 41% of its total income from outside Canada from more than 300 branches and offices in more than 35 countries.