CHICAGO--(BUSINESS WIRE)--Bank of Nova Scotia (Scotia) announced yesterday that it has agreed to purchase 51% of the common shares of Banco Colpatria, Colombia's fifth largest financial group with $6.2 billion in assets, owned by Mercantil Colpatria. The announcement has no impact on Scotia's Fitch Issuer Default Rating of 'AA-'.
Scotia's international presence remains the most diverse among Canadian banks with more than 2,000 branches and offices in more than 45 international markets. This acquisition, while somewhat pricey, is viewed as consistent with Scotia's strategic goal of profitably expanding into high-growth markets in Central and South America through organic growth and acquisitions.
Banco Colpatria is small relative to Scotia's asset base of over $556 billion. Further, the transaction is expected to be accretive in 2012 which would help alleviate its impact on the bank's efforts to build capital under Basel III.
Scotia made its first foray into the Colombian market in March 2010 with the purchase of Royal Bank of Scotland's wholesale banking operations there. This acquisition adds a retail platform to the bank's presence in the Colombian market.
The purchase price of approximately $1 billion consists of $500 million in cash and 10 million common shares of Scotia. The transaction is expected to close in December 2011 subject to regulatory approvals. The deal also provides Mercantil Colpatria with a put option to sell its remaining 49% stake to Scotia after seven years (at fair market value). Scotia will have four of seven board members of Banco Colpatria and will appoint a number of key executives.
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