Scotiabank to buy stake in Canadian Tire financial unit
TORONTO (Reuters) - Bank of Nova Scotia (BNS.TO: Quote)(BNS.N: Quote) is buying 20 percent of Canadian Tire Corp Ltd's CTCa.TO financial services business for C$500 million ($459 million) in a move to boost the bank's market share in credit cards and get access to more customers.
The bank, Canada's No. 3 lender, will also supply up to C$2.25 billion in credit card receivable financing to Canadian Tire's unit, it said on Thursday.
Brian Porter, who took over as Scotiabank's chief executive officer last year, said in April the bank would push for "meaningful" growth in its credit card business over the next few years.
"Canadian Tire is an iconic company with an incredibly strong brand and great customer focus," he said in a statement, adding that the deal would give the bank an opportunity to increase its customer base.
As part of the arrangement, which is expected to close in September, Canadian Tire has the option to sell up to another 29 percent of the business to Scotiabank within 10 years.
The retailer, which operates about 1,700 sporting goods and hardware retail and gasoline outlets, said last year it was looking for a partner for its credit card portfolio.
Canadian Tire's financial services division contributed about 10 percent of Canadian Tire's first-quarter revenue and is the eighth-largest credit card issuer in Canada, with 1.8 million active customer accounts and annual spending volume of C$12 billion.
Scotiabank will fund the acquisition with cash.
The move comes amid a struggle for credit card market share among Canada's banks as a slowing housing market has prompted them to look for other avenues to drive lending growth. Continued...