Royal Bank of Canada to Acquire City National Corp.
Royal Bank of Canada (NYSE: RY – $60.29) announced that it has entered into a merger agreement to acquire City National Corporation a premier U.S. private and commercial bank. RBC will pay, on average, approximately US$47.25 in cash and 0.7489 of an RBC common share for each share of City National common stock. Based on yesterday’s closing price of RBC’s common shares of US$62.16, the total transaction value is about US$5.4 billion. The aggregate consideration will be paid with approximately US$2.7 billion in cash and about 44 million RBC common shares, representing an approximate 50–50 percent cash and share mix. Headquartered in Los Angeles, City National serves high net worth and commercial clients across a number of the largest and most attractive U.S. metropolitan areas, including New York, Los Angeles, the San Francisco Bay Area and Orange County, California. Founded in 1954, City National’s commercial banking specialties include a market-leading position in the entertainment industry and an emerging presence in the rapidly growing technology and health care segments. RBC itself has a strong presence in the U.S., with a top-10 investment bank, the 8th largest wealth management firm and a growing asset management business. Analysts have long-awaited another major deal from RBC in wealth management, which is seen as a key growth platform for the Canadian bank during a period of slower consumer-loan growth for its mainstay domestic retail bank. The shares of Royal Bank of Canada have been hard hit of late thanks in part to the effects in the falloff in the price of natural resources, oil in particular, which provides Canada with much of its GDP. However, on a long-term basis, the shares are a worthwhile income holding with a yield of 4.2% and has solid growth potential over the next several years.