Scotiabank buys 20 per cent stake in Canadian Tire’s financial services business

TORONTO – Scotiabank (TSX:BNS) has signed a deal to buy a 20 per cent stake in Canadian Tire’s financial services business for $500 million in cash as part of a strategic partnership between the companies.

The bank will also provide a commitment to Canadian Tire’s financial services business for up to $2.25 billion in credit card receivable financing.

Under the deal, Scotiabank will become the exclusive partner for new financial products to the Canadian Tire customers.

The agreement also includes an option for Canadian Tire (TSX:CTC) to sell up to an additional 29 per cent stake in the financial services business to Scotiabank within the next 10 years at fair market value.

The deal with the bank came as Canadian Tire reported its first-quarter results and increased its dividend.

The retailer said it will now pay a quarterly dividend of 50 cents per share, up from 43.75 cents per share.

Canadian Tire said it earned a profit attributable to shareholders of $70.6 million or 88 cents per share for the quarter ended March 29, compared with $73 million or 90 cents per share a year ago.

Retail sales for the company totalled $2.46 billion, up from $2.43 billion in the first three months of 2013.

Same-store sales were down 0.5 per cent at its Canadian Tire stores, while both its Mark’s stores and FGL Sports, which includes Hockey Experts, Sports Experts, National Sports, Intersport, Pro Hockey Life and Atmosphere, saw increase.

FGL Sports same-store sales were up 6.4 per cent, while Mark’s gained 2.9 per cent.