Canadian Tire Corporation to accelerate the growth of Triangle Rewards with strategic repurchase of Financial Services business stake from Scotiabank
TORONTO, ON–Scotiabank announced it has signed and closed the sale of its 20 percent equity interest in Canadian Tire Financial Services (CTFS) to Canadian Tire Corporation. Scotiabank will continue to provide a committed credit facility of $1.1 billion to CTFS for the next 18 months.
Canadian Tire Corporation says the repurchase of Scotiabank’s stake in Canadian Tire Financial Services is an all-cash transaction, valued at $895 million and restores CTC’s full ownership of its financial services arm.
The transaction will enhance CTC’s flexibility in delivering added value to its more than 11 million active loyalty members, including its 2.3 million credit card holders. CTFS plays a pivotal role in the Company’s Triangle Rewards loyalty program, representing approximately 75% of all Canadian Tire Money (“eCTM”) issued to members annually.
Triangle Rewards is a cornerstone of CTC’s Better Connected strategy, driving significantly higher sales per member and sustained growth over time. Engaged Triangle Rewards members spend, on average, more than twice as much as non-members, and those with a Triangle credit card represent some of CTC’s most valued and engaged customers.
“This move enables us to expedite key elements of our Triangle Rewards strategy to stay relevant to customers’ changing needs and expand our credit card program to unlock even greater value for shareholders,” said Greg Hicks, President and CEO.
Hicks added, “Loyalty rewards programs, and their integration with financial institutions have evolved significantly since our original deal with Scotiabank. We have invested heavily in Triangle Rewards, and Scotiabank has done the same with its coalition loyalty program. While we have appreciated partnering with Scotiabank over the past decade, with both Scotiabank and CTC having received significant strategic and financial benefits, concluding this partnership will give us much greater control and flexibility in building out our loyalty program. Accelerating issuance of eCTM, including through opportunities with new partners such as Petro-Canada, is key to driving value for members in a rapidly evolving loyalty marketplace.”
CTC will evaluate strategic alternatives for its financial services business to be undertaken with Goldman Sachs as the company’s financial advisor during 2024. Consideration will be given to the optimal ownership structure of the CTFS business and to driving sustainable value in the Triangle Rewards program and credit card portfolio, building on CTFS’ strong track record of long-term growth.
Since 2014, the number of Triangle credit cardholders has increased from 1.8 million to 2.3 million and receivables have grown by more than 60% to approximately $7.1 billion at the end of Q2 2023. In 2022, the financial services business ranked as Canada’s seventh largest issuer of credit cards by receivables outstanding, generating $442 million of income before income taxes.
Scotiabank will continue to provide a committed credit facility of $1.1 billion to CTFS for the next 18 months.
CTC will record a charge of $328 million related to the transaction, equating to $5.88 per share, which will be reflected in the Company’s Q3 2023 results. The transaction will be accretive to normalized earnings in 2024.
The $895 million consideration will be funded by CTC’s existing short-term funding channels, supplemented by a $400 million, 18-month term loan from Desjardins Capital Markets.
As a result of the sale, Scotiabank will be recording an after-tax gain of approximately $319 million in its fourth quarter 2023 earnings. The transaction will benefit the Bank’s CET1 ratio by approximately 16bps.
Scotiabank is a leading bank in the Americas. Guided by our purpose: “for every future”, we help our customers, their families and their communities achieve success through a broad range of advice, products and services, including personal and commercial banking, wealth management and private banking, corporate and investment banking, and capital markets. With a team of over 90,000 employees and assets of approximately $1.4 trillion (as at July 31, 2023), Scotiabank trades on the Toronto Stock Exchange (TSX: BNS) and New York Stock Exchange (NYSE: BNS). For more information, please visit http://www.scotiabank.com and follow us on X @Scotiabank.
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