Laurentian Bank could fetch $2.6 billion in potential sale, analysts say

financialpost.com:

Laurentian Bank of Canada would likely attract interest from all of the major Canadian banks and could fetch around $2.6 billion if it puts itself up for sale, according to National Bank of Canada analyst Gabriel Dechaine.

Speculation about the Quebec-based bank’s fate swirled this week after it confirmed July 11 that it is conducting “a review of strategic options.”

While the bank has historically traded at around book value, it was traded at about only 60 per cent of that level earlier this week.

“We believe every Big Six bank will ‘kick the tires,'” National Bank analyst Dechaine wrote in a note to clients on July 12, in which he ballparked its current book value of about $2.6 billion as a likely sale price.

Laurentian Bank on July 11 said the strategic review is being done to “maximize shareholder and stakeholder value.” The bank beat analyst expectations and hiked its dividend when it reported second quarter earnings results in June.

Dechaine raised his price target to $51 per share and said he believes the move is more of a financial play, not a strategic one.

“Accretion math is one thing, strategic considerations are another,” he wrote. “While (Laurentian Bank) does provide some interesting geographic expansion opportunities (e.g., Quebec, Southern U.S.), it does fall short in other ways.”

John Aiken, head of research for Canada at Barclays PLC, said the process will at the very least spur some recognition that the stock is undervalued and should catch some upward share price momentum over the near term.

Canaccord Genuity Group Inc. financial analyst Scott Chan also suggest a book value target price, giving the shares considerable upside.

“A premium would be associated with this and you could see upwards of one