Bank of Montreal (TSE: BMO), and its indirect wholly owned Chicago-based subsidiary BMO Harris Bank N.A, announced Monday it has signed a deal to acquire Bank of the West, a California subsidiary of BNP Paribas (OTC: BNPQY).
This acquisition will accelerate BMO’s North American growth.
Acquisition Aligns with BMO’s Objectives
The transaction, which is expected to be completed in 2022, is valued at $16.3 billion. It will be funded with existing capital from BMO and Bank of the West.
The acquisition will bring nearly 1.8 million new customers to BMO, which will expand its banking presence with some 514 branches and additional service offices.
With the acquisition, adjusted earnings per share are expected to increase by more than 10% in 2024, according to the Canadian bank’s forecast.
BMO has committed to maintaining frontline jobs and does not anticipate any Bank of the West branch closures.
CEO Commentary
BMO Financial Group CEO Darryl White said, “With the strength of our performance and our integrated North American foundation, we have never been better positioned to take this next step in our growth strategy and to deliver for the new customers and colleagues we look forward to welcoming to BMO. This acquisition will add meaningful scale, expansion in attractive markets, and capabilities that will enable us to drive greater growth, returns and efficiencies.”
Wall Street’s Take
On December 17, TD Securities analyst Mario Mendonca kept a Buy rating to BMO and C$160 price target. This implies 22.4% upside potential.
The rest of the Street is bullish on BMO with a Strong Buy analyst consensus rating based on six Buys and two Holds. The average Bank of Montreal price target of C$152.06 implies 16.3% upside potential to current levels.
