RBC (RY) to Purchase Remaining Stake in RBC Dexia Investor Services
Tweet
Share
E-mailGet Alerts RY Hot Sheet
Price: $205.23 +0.01%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 5.6%
EPS Growth %: +5.2%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 5.6%
EPS Growth %: +5.2%
Join SI Premium – FREE
Royal Bank of Canada (NYSE: RY) today announced that it has entered into a definitive agreement to acquire the 50 per cent stake that RBC does not already own in the joint venture RBC Dexia Investor Services Limited (RBC Dexia) from Banque Internationale Luxembourg S. A. (BIL) (formerly Dexia Banque Internationale Luxembourg S. A.) for total consideration of €837.5 million (C$1.1 billion) in cash. Following the closing of the transaction RBC will own 100 per cent of RBC Dexia.
In conjunction with entering the agreement, RBC Dexia has sold €1.4 billion (C$1.9 billion) in nominal value of Dexia Group fixed income securities back to the Dexia Group and acquired approximately an equivalent amount of U.S. dollar-denominated securities consisting primarily of notes issued by large global financial institutions. RBC Dexia will incur a loss from the sale of the Dexia Group securities and RBC's proportionate share of this loss is approximately $30 million after tax, which will be recorded in the second quarter. RBC Dexia's capital position is not materially impacted from this sale and purchase of securities.
With this acquisition of the other 50 per cent in RBC Dexia that RBC does not already own, we are required, from an accounting perspective, to revalue our existing investment in the joint venture to reflect the purchase price. This revaluation results in a non-cash loss of approximately $170 million after tax, primarily reflecting the write-down of intangibles. The majority of this loss will be recorded in the second fiscal quarter.
RBC expects the acquisition to be moderately accretive to earnings in 2013.
In conjunction with entering the agreement, RBC Dexia has sold €1.4 billion (C$1.9 billion) in nominal value of Dexia Group fixed income securities back to the Dexia Group and acquired approximately an equivalent amount of U.S. dollar-denominated securities consisting primarily of notes issued by large global financial institutions. RBC Dexia will incur a loss from the sale of the Dexia Group securities and RBC's proportionate share of this loss is approximately $30 million after tax, which will be recorded in the second quarter. RBC Dexia's capital position is not materially impacted from this sale and purchase of securities.
With this acquisition of the other 50 per cent in RBC Dexia that RBC does not already own, we are required, from an accounting perspective, to revalue our existing investment in the joint venture to reflect the purchase price. This revaluation results in a non-cash loss of approximately $170 million after tax, primarily reflecting the write-down of intangibles. The majority of this loss will be recorded in the second fiscal quarter.
RBC expects the acquisition to be moderately accretive to earnings in 2013.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Walmart (WMT) PT Lowered to $130 at UBS on Investment Narrative's Competing Dynamics
- Is the global equity rally broadening? UBS weighs in
- RenovoRx regains Nasdaq minimum bid price compliance
Create E-mail Alert Related Categories
Mergers and AcquisitionsRelated Entities
EarningsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
