Chilean/Canadian Banks

Chilean/Canadian Banks

Scotiabank says its offer to buy a sizable stake in BBVA Chile for $2.9-billion has been accepted.

The Canadian bank says BBVA agreed Tuesday to sell its 69.19 per cent stake in BBVA Chile and its interests in certain subsidiaries.

Scotiabank says it intends to merge BBVA Chile with its existing Scotiabank Chile operations, subject to regulatory approvals.

Chile's Said family, which owns 31.62 per cent of BBVA Chile, has waived its right of first refusal to acquire the share being sold to ScotiaBank, but is willing to spent up to $650-million to own up to 25 per cent of the combined business once Scotiabank Chile and BBVA Chile are merged.

When the deal was initially announced last week, Scotiabank said the transaction is in line with its goal of increasing scale within the Chilean banking sector and the Pacific Alliance countries.

The acquisition will double Scotiabank's market share in Chile to approximately 14 per cent and make Scotiabank the third largest private sector bank in the country.

2.1x Book Value and a PE of 18x does not look a bad deal at all for Scotiabank given the bank’s ROE of 11.9%. The deal assumes a ROE of 11.7%.