Canada's Royal Bank Divestiture?

By: Ian Campbell | Tue, Jun 7, 2011
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The Royal Bank of Canada (RBC) purchased Centura Banks, headquartered in Rocky Mount, North Carolina, in mid-2001 for U.S.$2.3 billion (then Cdn$3.5 billion). Centura Banks, now named RBC Bank, subsequently acquired U.S. regional banks in Georgia, Florida, and Alabama. RBC Bank currently:

Two early April articles (now 60 days old), one published by Thomson Reuters titled 'FACTBOX-RBC eyes sale of U.S. Retail Unit - reading time 3 minutes, and one published by Globe Investor titled 'RBC plans retreat from U.S.' - reading time 5 minutes, then reported that RBC was (and I presume still is) planning to sell or merge its equity interest in RBC Bank. In combination, these articles report that:

If the quoted $ amounts in the articles are expressed in $U.S., and RBC indeed does sell RBC Bank for a price approximating the aforementioned 'value estimate', RBC likely will suffer a loss of far more than Cdn$2.0 billion on the transaction given that the $U.S. and $Cdn currently are close to par in circumstances where the U.S.$ traded at an often significant premium to the $Cdn between 2001 and 2010 when the aforementioned U.S. acquisitions were made.

So far, from my perspective, all of the foregoing is but interesting background to what I assess as the 'real issue' here. As best I know, RBC is strategized and managed by an excellent Board of Directors and Senior Management Group.

That leads me to the following thoughts:

After two months, no sale transaction, merger, or other transaction has been announced. I think this is something to monitor and think about going forward - frankly more because of the question I pose and its ultimate answer, rather than for anything to do with the specifics of any transaction RBC may enter into in respect of RBC Bank.



Ian Campbell

Author: Ian Campbell

Ian R. Campbell, FCA, FCBV
Business Transition Simplified

Through his website and his Business Transition & Valuation Review newsletter Ian R. Campbell shares his perspectives on business transition, business valuation and world economic and financial markets influences on those two topics. A recognized business valuation and transition authority, he founded Toronto based Campbell Valuation Partners Limited (1976). He currently is working to bring his business valuation and transition experience to both business owners and their advisors in our new economic, business and financial markets normal.

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