French international banking group BNP Paribas SA (BNPQY) has signed an agreement to sell its subsidiary, Bank of the West, to Canada-based BMO Financial Group for $16.3 billion in cash.
BNP Paribas offers retail and investment banking services and has operations in 68 countries, where it employs more than 193,000 people.
Transaction Details
The acquisition, which is likely to close next year, is expected to generate a capital gain of approximately €2.9 billion for BNP Paribas and increase its Common Equity Tier 1 (CET1) ratio by around 170 basis points.
Commenting on the transaction, the CEO and Director of BNP Paribas Group, Jean-Laurent Bonnafé, said, “This is a value accretive transaction for all sides, which emphasizes the quality of Bank of the West franchise.”
About Bank of the West
Headquartered in San Francisco, Bank of the West operates more than 500 branches and offices in 24 states, primarily in the Western and Midwestern U.S. It employs more than 9,000 people and serves nearly 1.8 million customers.
Other Plans
After the transaction is closed, BNP Paribas plans to use the sale proceeds to repurchase shares worth about €4 billion.
Additionally, it plans to sign long-term distribution agreements with BMO to provide Equipment Finance and Cash Management solutions in North America.
Wall Street’s Take
Last week, Kepler Capital analyst Anna Maria Benassi maintained a Hold rating on the stock with a price target of $69.24 (120.6% upside potential).
Further, On December 9, Barclays (BCS) analyst Omar Fall reiterated a Hold rating on BNP Paribas with a price target of $64.74 (106.3% upside potential).
Fall expects the company to report earnings per share (EPS) of $2 in the fourth quarter of 2021.
Overall, the stock has a Hold consensus rating based on 2 Holds. The average BNP Paribas stock prediction of $66.99 implies 113.4% upside potential. Shares have gained 33.7% over the past year.
Hedge Funds’ Confidence
TipRanks’ Hedge Fund Trading Activity tool shows that hedge fund confidence in BNP Paribas is currently Neutral, as the cumulative change in holdings across the one hedge fund that was active in the last quarter was an increase of 1.4 million shares.
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