Canadian Tire reviews options for financial arm, buys back Scotiabank's stake

Canadian Tire

31/10/2023 13:34

Oct 31 (Reuters) - Canadian Tire  CTCa.TO  said on
Tuesday it was reviewing alternatives for its financial services
arm and had bought back Scotiabank's  BNS.TO  20% stake in the
unit in a cash transaction valued at C$895 million ($647.14
million).
    Bank of Nova Scotia had bought the stake in Canadian Tire
Financial Services (CTFS) for C$500 million in 2014 as it looked
to boost its share in the credit cards market and get access to
more customers.
    "Concluding this partnership (with Scotiabank) will give us
much greater control and flexibility in building out our loyalty
program," said Canadian Tire CEO Greg Hicks.
    CTFS plays a key role in the company's loyalty program,
using which members on average spend more than twice as much as
non-members, the retailer said. 
    Canadian Tire (CTC) said it would evaluate strategic
alternatives for CTFS, which will be undertaken with Goldman
Sachs as the company's financial advisor during 2024. 
    CTC will record a charge of C$328 million related to the
transaction, amounting to C$5.88 per share, which will be
reflected in its third-quarter 2023 results.
    Scotia said the deal would benefit its CET1 ratio, a key
gauge of a bank's financial strength, by about 16 basis points.
    The bank, Canada's fourth largest bank, cut 3% of its
workforce earlier this month, which it had said would be a 10
basis points hit to its CET1 ratio.
    Scotiabank said it will continue to provide a committed
credit facility of C$1.1 billion to CTFS for the next 18 months.

($1 = 1.3830 Canadian dollars)

 (Reporting by Granth Vanaik in Bengaluru; Editing by Shinjini
Ganguli)
 ((Granth.Vanaik@thomsonreuters.com | X : https://twitter.com/Vanaik_Granth;))