BMO’s $16.3 bn Acquisition of BNP Paribas’ Bank of the West

By Adil Amlaiky, Anish Umasuthan, and Karen Zhuang (McGill University), Demi Akinjide, Ujwal Gurung, and Ishaan Patel (University of Bristol)

 

Overview of the deal


Acquirer: Bank of Montreal (BMO)

Target: Bank of the West (BNP Paribas’ US operation)

Total Transaction Size: $16.3 billion

Announcement date: December 20th, 2021

Expected Close Date: End of 2022

Acquirer advisor: Morgan Stanley and BMO Capital Markets

Target advisor: J.P. Morgan Securities, Goldman Sachs Bank Europe, and BNP Paribas Corporate Finance


Bank of Montreal (BMO) is acquiring BNP Paribas’ US Operation, Bank of the West, for a cash purchase price of $16.3 billion, using the combined entities’ balance sheet excess capital upon closing. By merging Bank of the West with its US subsidiary BMO Harris Bank, BMO will expand its US banking operation, notably in California, with an addition of 1.8 million customers and 514 branches of wealth and commercial offices. This deal, targeting California, which is economically larger than Canada and where 70% of Bank of the West’s deposits are, is set to increase BMO’s size. Being BMO’s largest acquisition in its history, the deal allows diversification of BMO’s revenue stream away from Canada.


The sale comes as no surprise following the trend of foreign banks leaving the US, with BBVA and HSBC having sold their US operations due to an increasingly competitive environment. With the proceeds from the sale, BNP Paribas aims to carry out stock repurchases, bolt-on deals, and investments. More importantly, the Paris bank aims to make a substantial distribution to shareholders through buyback to compensate for diluted EPS.


“With the strength of our performance and our integrated North American foundation, we have never been better positioned to take this next step in our growth strategy and to deliver for the new customers and colleagues we look forward to welcoming to BMO.” (Darryl White - CEO, Bank of Montreal)

Company Details (Acquirer - Bank of Montreal (BMO))


Bank of Montreal is an international investment bank and financial service provider founded in Montreal, Quebec, and headquartered in Toronto, Ontario. A part of the Big Five banks in Canada, BMO is the fourth largest bank in Canada in terms of assets.


Founded in 1817, headquartered in Toronto, Canada

CEO: Darryl White

Number of employees: 43,863 (2021)

Market Cap: $73.37 billion (as of 09/01/2022)

EV: $158.27 billion (as of 09/01/2022)

LTM Revenue: $21.92 billion

LTM EBITDA: $9.53 billion

LTM EV/Revenue: 7.22x