National Bank of Canada bolstered its offer to acquire failed technology financier Silicon Valley Bank’s Canadian arm to squeeze out rival bidders days before it emerged as the winner.
Thirteen companies, including National Bank, bid to take over either all or some of SVB Canada’s loan book, according to court filings released Friday, which revealed new details about the months-long bidding process. Last week, National Bank emerged as the successful bidder for SVB Canada as the country’s sixth-largest lender seeks to compete with rivals for clients in technology and innovation lending.
The deal is pending approval by the Ontario Superior Court of Justice, and PricewaterhouseCoopers Inc. – the liquidator overseeing the winding up of SVB Canada – has the option to terminate the deal if it does not close by Oct. 1, according to the filings. National Bank said last week that it expects the transaction to close in the coming weeks.
National Bank is buying SVB’s loan book in the technology, life sciences and global fund banking sectors, adding $1-billion in loan commitments, of which $325-million are outstanding. The deal expands its commercial banking business outside of Quebec by growing its client base in Ontario and Western Canada. The bank did not disclose the financial terms of the deal, and they were redacted from the court filings.
National Bank strikes deal to buy Silicon Valley Bank’s Canadian loan book
PwC contacted more than 110 potential bidders to gauge interest. Fifty of those candidates signed non-disclosure agreements to review and assess SVB Canada’s corporate and financial information.
By late May, 13 companies submitted initial bids. PwC moved just seven of those bidders into the second stage to access more of SVB Canada’s confidential information, eliminating the others due to “economic or structural terms” of their offers.
In mid-July, PwC carved out a US$60-million debt facility for Toronto-based e-commerce merchant financier Clearco after bidders attributed a low value to the challenged company’s debt. Clearco backer Inovia Capital and two other investors purchased that portion of SVB Canada’s loan book as part of a refinancing effort that the Montreal venture capital firm is leading to stabilize Clearco.
Clearco backers buy back its debt amid windup of Silicon Valley Bank’s Canadian arm
By the final bid deadline – which had been rescheduled to July 10 from June 26 after some candidates said they did not have enough time to evaluate SVB Canada’s information – five bidders submitted offers. Two bidders wanted to acquire all the loans of the Canadian branch, while three wanted to buy a portion of the portfolio.
PwC narrowed the list down to three offers and started negotiating for better terms. Shortly after, it eliminated one of those bidders when the liquidator realized that conditions of the offer would “be incapable of being met,” according to the filings.
With the race down to two bidders, National Bank stepped in on July 28 with a stronger offer than its initial final bid. Three days later, PwC and the bank struck the deal.
The liquidator did not reveal the final purchase price and National Bank declined a request for comment.
PwC said in the court filings that National Bank’s offer was the best available bid because the lender is buying all of SVB Canada’s remaining assets, it is a fully licensed bank and will not require further approvals to operate the acquired loan book, and the deal includes few conditions for closing. The liquidator also said that the deal was superior because it is not conditional on a minimum number of SVB Canada employees joining National Bank.
Canada’s Competition Bureau green-lit the deal in late July after National Bank and PwC spoke with the consumer watchdog.