Canadian Tire (TSX:CTCa) Corp. (TSX:CTC) has reacquired a 20% stake in Canadian Tire Financial Services (CTFS) from Scotiabank (TSX:BNS) for C$895 million ($647.3 million), achieving full ownership of the entity. The transaction, announced by CEO Greg Hicks on Tuesday, is expected to provide greater control over their Triangle Rewards loyalty program and credit card portfolio.The decision to regain full ownership of CTFS is part of a broader strategy to explore optimal ownership structures for the company's financial services business. The move is anticipated to enhance flexibility and value for its 11 million active loyalty members, including 2.3 million credit-card subscribers.The repurchase of the stake from Scotiabank, initially bought in a notable $500 million deal in 2014, will result in a substantial C$328 million charge in Canadian Tire's Q3 results. Despite this financial implication, Scotiabank will continue to support CTFS by providing a C$1.1 billion credit facility for an additional 18 months.CTFS plays a crucial role in the Triangle Rewards loyalty program, issuing three-quarters of all Canadian Tire Money each year. Hicks emphasized that this acquisition accelerates the Triangle Rewards strategy, addressing dynamic customer needs and bolstering the credit-card program.
InvestingPro Insights
In line with the recent developments of Canadian Tire Corp., InvestingPro provides valuable tips and real-time data that further illuminates the company's financial position and future prospects.
InvestingPro Tips highlight that the company's management has been aggressively buying back shares, a strategy that aligns with the recent acquisition of the 20% stake in CTFS. Additionally, the company has maintained a strong track record of dividend payments, having raised its dividend for 13 consecutive years. This could be an attractive feature for income-focused investors.
Turning to InvestingPro Data, the company has a market cap of $5408.73M USD, with a P/E ratio of 18.88, suggesting a reasonable valuation compared to earnings. Over the last twelve months as of Q2 2023, the company's revenue was $13234.55M USD, indicating substantial business activity. However, it's worth noting that the revenue growth during this period was relatively modest, at 1.39%.
In conclusion, the InvestingPro platform offers numerous additional tips and data points that could be beneficial for investors interested in Canadian Tire Corp. These insights could help investors make more informed decisions by providing a comprehensive understanding of the company's financial health and future outlook.
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