By: Caellum Gallander

Published: Dec 11, 2025

It is always satisfying when a prediction pans out, especially when it happens relatively quickly. Three months after we wrote about Laurentian Bank’s takeover potential, that call now feels downright clairvoyant. On Dec. 2, the Montreal-based bank finally ended years of strategic wandering and announced it would be acquired, heading for the public-market exit.

The roughly $1.9-billion deal will see National Bank of Canada acquire Laurentian’s retail, small- and medium-enterprise banking portfolios, along with its syndicated-loan business. Meanwhile, Fairstone Bank of Canada will take the remaining commercial bank and, importantly, will buy all outstanding common shares for $40.50 apiece. The Laurentian name, brand and Montreal headquarters will stay intact. The announcement provided the clarity that sales of this sort tend to offer. After years of grappling with outdated technology, operational snags, and a retail footprint dwarfed by exponentially larger competitors, the bank’s final form is taking shape.

Laurentian has not traded at the offer price since mid-2023, when it first announced it was exploring strategic alternatives, effectively saying, “Yes, we’re taking offers.”

The $40.50 bid represents about a 22-per-cent premium to the pre deal share price. While that kind of pop is always pleasant, LB’s book value stands at $61.90, a significant distance from the bid. With Benj Gallander originally hoping for a takeover north of $50, the result falls short of that dream scenario. That said, given Laurentian’s rising provisions, heavy restructuring costs, and lingering reputational bruises from the 2023 IT outage, expecting a significantly better bid may have been optimistic.

Crucially, the agreement includes provisions that improve the likelihood of closing. The Caisse de dépôt et placement du Québec, owner of roughly 8 per cent of Laurentian’s shares, has signed a voting support agreement. That is a meaningful endorsement ahead of the shareholder vote, where two-thirds approval will be required. Matching $40-million termination fees on both sides further discourage cold feet and raise the bar for any rival bidder looking to crash the party. From our perspective, though, a party crasher would be welcome.

One of our questions was whether Laurentian would continue paying its dividend prior to the merger date. Days after the sale announcement, the bank declared its regular $0.47 quarterly payout for early February, a reassuring signal. While the agreement prevents any increase to the dividend, it does not restrict continuing payments. With a yield of 4.7 per cent, investors would certainly miss those cheques between now and the expected close in late 2026.

Regulatory approval is the next major hurdle. The transaction requires approval from federal banking and competition authorities. National Bank’s involvement may raise eyebrows, especially in Quebec, but the structure appears designed to avoid triggering alarms. Rather than absorbing Laurentian wholesale, legacy issues and all, National Bank is only taking select portfolios. The move continues its measured expansion strategy after its 2025 acquisition of Canadian Western Bank.

Operationally, the transition will come with some friction. Laurentian’s 57 retail branches will not automatically transfer to National Bank, meaning staff will not be swept over with the assets. Employees may apply for roles at National, but no guarantees come with the deal. One would think that keeping the majority of the staff who know the business would be beneficial. As for Fairstone, absorbing the commercial bank adds scale, but also complexity, particularly given Laurentian’s mixed tech infrastructure.

The combination of National’s involvement, the Caisse’s support and the symmetrical breakup fees makes the current arrangement solid. Could one of the Big Five banks swoop in, raise the ante and swallow Laurentian like a minnow? In theory, yes. In practice, a rival would face sharp regulatory scrutiny and would need to offer a meaningfully higher price to overcome the contractual hurdles already in place. In other words, possible, but not likely.

For now, Laurentian Bank’s chapter as a publicly traded institution appears to be closing. The premium may not dazzle, but it gives shareholders a clean exit and a timeline. Benj intends to collect the dividend and ride things out, while also holding onto the hope for a sweeter bid. After first buying in at $39.57 in 2018, he thankfully averaged down at $31.12 in 2022, a move that helped turn this long, bumpy ride into a more respectable return. Laurentian may not have turned into the 100-per-cent-plus winner once imagined, but between the modest capital gain and the steady stream of dividends, the outcome is hardly a sour one.

Caellum Gallander is a contributor to the Contra the Heard Investment Letter.