Smith Financial Corp to acquire Home Capital for $1.7 billion

Home Capital Group Inc (TSX: HCG) said on Monday that it had entered into a definitive agreement to be bought by a wholly-owned subsidiary of Smith Financial Corporation, an entity controlled by Stephen Smith.

Under the terms of the agreement, Smith Financial Corp’s unit will acquire the issued and outstanding common shares of Home Capital, which it does not already own, for $44.00 per share in cash.

At present, Smith Financial Corp owns about 9.1% of the issued and outstanding common shares of Home Capital Group.

“The Board, together with our financial and legal advisors, conducted a thorough review of the proposal from SFC and concluded that the Transaction is in the best interests of the Company and fair, from a financial point of view, to shareholders. We are pleased to have reached an agreement that provides shareholders with compelling and certain value in the form of an all-cash offer,” Alan Hibben, Chairman of the Board of Directors of Home Capital, said in a press release.

The purchase price represents a 63% premium compared to the closing price, and a 72% premium to the volume weighted average trading price for the 20 days ending, on November 18th on the Toronto Stock Exchange, Home Capital said.

The equity of Home Capital Group is valued at nearly $1.7 billion.

“With its talented workforce, diversified presence across Canada, trusted positions as a lender and deposit-taker and 36-year operating history, Home Capital is a strategic asset,” Stephen Smith said in a press release.

“Having followed the development of the business for three decades, I can attest to Home Capital’s strong partnerships with mortgage brokers and great customer relationships. I’m also impressed with the direction the Company has taken to build quality assets and enduring advantages in its chosen industry segments.”

The acquisition, which is subject to regulatory approvals under the Bank Act (Canada), the Trust and Loan Companies Act (Canada) and the Competition Act (Canada), is expected to close in mid-2023.