Agreement designed to grow retail and financial services businesses, provide significant benefits to customers and facilitate closer collaboration to enhance customer affinity for both brands
TORONTO, May 8, 2014 /CNW/ - Canadian Tire Corporation, Limited (TSX:CTC, TSX:CTC.a) and Scotiabank (TSX: BNS, NYSE: BNS) today announced a far-reaching strategic partnership that creates unprecedented opportunities for joint marketing to drive new business growth. The agreement will see Scotiabank acquire a 20% equity interest in Canadian Tire's financial services business for $500 million in cash. Scotiabank will also provide a funding commitment to Canadian Tire's financial services business with credit card receivable financing of up to $2.25 billion.
"The real strength of our partnership with Scotiabank lies in the opportunity it creates to benefit our retail customers and grow our business," said Stephen Wetmore, Chief Executive Officer, Canadian Tire Corporation. "By working together and innovating, we will better serve our customers, earn new business, and strengthen our community initiatives."
Canadian Tire's financial services division is the eighth largest credit card issuer in Canada with $4.4 billion in receivables, 1.8 million active customer accounts and $12 billion in annual spend volume. The agreement also provides an option for Canadian Tire to sell up to an additional 29% of its financial services business to Scotiabank within the next 10 years at the then fair market value."We are excited about the possibilities that come with this partnership. Canadian Tire is an iconic company with an incredibly strong brand and great customer focus," said Brian Porter, President and Chief Executive Officer, Scotiabank. "This is a strategic investment in a high performing business and a partnership with the Canadian Tire family of companies will provide opportunities for us to grow our customer base and provide unique and relevant solutions to our customers." The investment in the financial services business will be funded from Scotiabank's cash resources and is expected to be modestly accretive to Scotiabank's earnings. The deal is subject to customary closing conditions and regulatory approvals and the transaction is expected to close by September 30, 2014. Marketing Agreement Scotiabank will become the exclusive partner for new financial products to the Canadian Tire portfolio of customers. The agreement allows for joint marketing efforts to introduce the companies' respective customers to each other's brands with exclusive offers. Available only to customers of the Canadian Tire family of companies and Scotiabank, the offers are expected to attract new customers and provide more value to loyal consumers.