The entry to the Home Capital Group's headquarters in Toronto.Chris Helgren/Reuters
Billionaire financier Stephen Smith is a step closer to sealing his $1.7-billion takeover of Home Capital Group Inc. HCT-T after the Competition Bureau said it does not plan on opposing the deal.
The bureau indicated in a “no-action letter” that it does not intend to make an application to block the transaction, according to a Home Capital statement Monday.
The deal is still expected to close in mid-2023 as it moves through two remaining rounds of regulatory approvals with the Office of the Superintendent of Financial Institutions and the Minister of Finance.
In November, a subsidiary of Smith Financial Corp. – a company Mr. Smith controls that already owns 9.1 per cent of Home Capital – clinched a cash offer of $44 a share to acquire all the remaining shares. If the deal does not close by May 20, Smith Financial will have to pay $0.25 more a share for each three-month delay.
A stalwart in Canada’s mortgage industry, Mr. Smith holds sizable stakes in other lenders – which could have given fodder to anti-competition concerns. He is executive chairman and co-founder of First National Financial Corp., one of the country’s largest non-bank lenders, and is also chairman of prominent private mortgage insurer Canada Guaranty Mortgage Insurance Co. He is also the largest shareholder in Equitable Bank, and is chairman and co-owner of Fairstone Bank of Canada, formerly Walmart Bank Canada.
Mr. Smith struck the Home Capital deal as high mortgage rates and slumping real estate prices cool home-buying. Home Capital’s share price sunk early last year as investors balked at torrid interest-rate hikes that threatened to temper lending in Canada’s housing market. Home Capital was also coming out of a tumultuous period in its history after it recovered from near collapse in 2017 when investor Warren Buffett rescued the lender.
Home Capital failed to attract any other offers late last year. The deal included a six-week go-shop period that allowed the lender to solicit offers from other potential buyers.
While the acquisition was announced five months ago, it has been a year in the making. Home Capital rejected two previous takeover bids from Smith Financial before accepting the current deal.
Last April, Home Capital received an unsolicited bid from Smith Financial and a takeover partner, who tabled a cash offer of $44 a share, a 26-per-cent premium to the lender’s closing price. Home Capital rejected the offer, saying that it was too low.
As Home Capital’s share price struggled to recover, Smith Financial made a second offer in August at $37.50 a share. The lender asked Smith Financial to raise its bid above $40, but rejected the offer shortly after when the two parties could not come to an agreement.