Royal Bank of Canada is ready to take another shot at U.S. banking, agreeing to buy City National in Los Angeles.
Royal Bank of Canada will pay $5.4 billion, or $93.80 a share, in cash and stock for the $33 billion-asset City National in a deal that is expected to close by the end of this year. Based on the price, this is one of the biggest bank acquisitions in recent memory.
"We believe this combination creates a powerful expansion platform for focused long-term growth in the country which we view as our second home market," Dave McKay, Royal Bank of Canada's president and chief executive, said in a press release Thursday. "In line with RBC's strategic goals, City National serves high-net-worth and commercial client segments in select high-growth markets, and represents a unique opportunity to complement and enhance our existing U.S. businesses and product offering."
"This combination is a compelling opportunity," Russell Goldsmith, City National's chairman and chief executive, added. "It will deliver significant value to City National shareholders along with the opportunity to participate in the growth of RBC. It will promote both continuity and growth, enabling our outstanding team of colleagues to maintain and even strengthen City National's value proposition."
Goldsmith, who has led City National since 1995, will remain chairman and CEO of City National, and he also will be responsible for RBC's U.S. wealth management unit. The Goldsmith family has agreed to vote their City National holdings in favor of the deal and to hold at least 50% of the Royal Bank of Canada shares they receive for three years after the deal's closing.
Royal Bank of Canada said it expects the deal to be accretive to its earnings per share, excluding amortization of intangibles, by the end of its third year, though it should start adding to the bottom line in year two.
Bank of America Merrill Lynch and Sandler O'Neill advised City National, while Wachtell, Lipton, Rosen & Katz provided legal counsel. RBC Capital Markets and J.P. Morgan Securities advised Royal Bank of Canada, which received legal advice from Sullivan & Cromwell and Osler, Hoskin & Harcourt.
This would be Royal Bank of Canada's second attempt at traction in U.S. banking, though this time around the move seems more focused on affluent clients. The company put together a string of bank acquisitions in the southeastern United States, starting with Centura Banks in 2001, before selling its operations to PNC Financial Services in 2012 for nearly $3.5 billion.