Royal Bank of Canada (NYSE: RY) announced on Monday that it will acquire all the outstanding shares of HSBC Canada (HSBC) in an all-cash deal for C$13.5 billion. Shares of HSBC were up by more than 4% in pre-market trading following the news.
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Dave McKay, President & CEO of RBC commented on the deal, “HSBC Canada offers the opportunity to add a complementary business and client base in the market we know best…”
Wall Street analysts have a consensus price target of $105.62 on the RY stock implying an upside potential of 7.1% at current levels, as indicated by the above graphic.
The acquisition is expected to close late next year and is anticipated to be accretive by around 6% earnings per share relative to 2024 consensus estimates for RBC.
Moreover, this acquisition is expected to “have an Internal Rate of Return of 14% and a marginal return on tangible common equity of 27%. RBC expects its CET1 [common equity tier 1] ratio to exceed 11.5% upon close.”
This acquisition of HSBC Canada means that “all of HSBC Canada’s earnings from June 30, 2022 through close will accrue to RBC.”
