Review staff and submitted
If you’re a member of Community Savings and were counting on a tidy windfall following the announcement that Western Financial Group had offered a substantial bid to take over the 30 branches of the credit union, who better put your plans for spending the windfall on hold.
According to a statement released by Western Financial Group (WFG) on March 6 of this year the company announced their intentions of submitting a proposal to acquire Community Savings lock, stock and barrel. However the idea was quickly shot down by the board of directors of Community Savings less than 24 hours after receiving the bid and determined that the proposal would not be put before the membership to be held today, Tuesday, March 18.
“We have informed the board of directors of Community Savings of our pending proposal and requested that it be placed on the agenda of their special meeting on March 18, 2008,” said Scott Tannas, President and CEO of WFG in a prepared statement. “This special meeting has already been called for the purpose of approving a merger proposal that involves Community Savings and two other Alberta-based credit unions. Our proposal contains significant benefits to the 110,000 members and 625 employees of Community Savings.”
According to the press release issued by WFG, the proposal was to include a significant cash windfall for every member of Community Savings (estimated to be between $1,500 and $1,800 per member); 100 per cent job security for employees of Community Savings including staff at their head office and at all 30 branches; and complete preservation of products, prices, service levels and branches that exist today.
“There are a great number of similarities between our organizations.” Tannas said. “We are in many of the same towns and cities, we have the same community-based values and cultures, and we estimate that 20 per cent of Community Savings members are already insurance customers of Western Financial Group.”
According to the release, WFG is a leader in providing insurance, financial services and banking services in over 80 communities, to more than 400,000 individuals and businesses in Western Canada through its WFG Agency Network locations, its affiliated insurance brokers, Western Life Assurance Company and Bank West.
In another statement released last week however, the Board of Directors of Community Savings vowed to fight what they called a “hostile take over” and flat-out rejected the bid from WFG.
“When 94 per cent of our members tell us that it’s important to remain a member-owned credit union, the Board of Directors has clear marching orders,” said Murray Haubrich, President and Chief Executive Officer of Community Savings, in the press release. “There is no way the Board can take any steps that would cause us to dissolve what we’ve got and replace it with a bank.”
According to the statement, credit union boards of directors are charged with the stewardship of their organizations and are bound to act in the best interests of their members and provide a framework that is member-owned, democratically-governed and that shares profits with its members.
“A few things stood out to the Board,” Haubrich said in discussing the bid. “The document is very brief and contains a conditional offer. Even if we considered it, members wouldn’t be able to count on it actually occurring. A move like this has never been successful in Canada, regulating bodies haven’t approved the idea, and there is nothing to substantiate that Western Financial Group can afford to purchase an organization more than five times its size.”
In addition to providing insurance, financial and banking services to communities and individuals throughout western Canada, WFG is also the largest property and casualty insurer in the west and fourth largest in Canada consisting of 90 branch offices in the prairie provinces and British Columbia.
WGF also operates Bank West, a Canadian chartered bank that provides insurance premium financing as well as loans, GICs, mortgages and other banking products as well as Western Life Assurance Company which provides its own life and health insurance products to commercial businesses and individuals in Canada.
WFG also has a strategic partnership with Jennings Capital Inc. a full service investment dealer headquartered in Calgary, Alberta.
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“If our members are tempted by the cash that Western Financial says might be paid to them,” Haubrich countered, “they should understand that they certainly wouldn’t receive annual profit sharing.”
In their statement Haubrich said Community Savings paid $14.5 million in profit sharing to its members in 2007, and its total payout over the past four years approached $56 million. In January, one member’s payout approached $50,000, while a 13-year-old with some investments earned almost $200. An average member using normal banking services easily receives $800 a year.
“Community Savings was an ideal platform on which we could mutually build a leading western Canadian financial leader’” Tannas said in yet another press release issued last Monday. “It is unfortunate that their members will not get the opportunity to formally consider it”.
Tannas added that the bid to acquire Community Savings amounted to approximately $345 million in cash, shares or payments to members.
Community Savings said in their statement that they have explored a number of options which they feel will enable themselves to thrive in the coming years including the Board’s priorities that focus on remaining a member-owned credit union, providing Alberta-wide branch access for members, and retaining its 100 per cent deposit guarantee.
And while they may have rejected the bid from WFG, Community Savings said they are looking forward to another proposed merger with two other Alberta-based credit unions.
“We are looking forward to members approving the Board’s recommendation to merge with Common Wealth Credit Union and Servus Credit Union,” Haubrich said. “It would introduce province-wide access for our members, and the Community Savings Board of Directors remains confident that its recommendation is in the best interests of the members.”
If the merger should proceed, the three credit unions combined would provide province-wide access through 92 branches in 63 communities, 357,000 members, and assets approaching $9 billion and would create Canada’s third largest credit union.
Member voting on that merger is expected to take place soon.
The Rimbey Review contacted the local branch an effort to gauge area reaction to the takeover offer, however all employees of Community Savings, including branch managers, were restricted from discussing either bid with the exception of Haubrich.
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“If our members are tempted by the cash that Western Financial says might be paid to them,” Haubrich countered, “they should understand that they certainly wouldn’t receive annual profit sharing.”
In their statement Haubrich said Community Savings paid $14.5 million in profit sharing to its members in 2007, and its total payout over the past four years approached $56 million. In January, one member’s payout approached $50,000, while a 13-year-old with some investments earned almost $200. An average member using normal banking services easily receives $800 a year.
“Community Savings was an ideal platform on which we could mutually build a leading western Canadian financial leader’” Tannas said in yet another press release issued last Monday. “It is unfortunate that their members will not get the opportunity to formally consider it”.
Tannas added that the bid to acquire Community Savings amounted to approximately $345 million in cash, shares or payments to members.
Community Savings said in their statement that they have explored a number of options which they feel will enable themselves to thrive in the coming years including the Board’s priorities that focus on remaining a member-owned credit union, providing Alberta-wide branch access for members, and retaining its 100 per cent deposit guarantee.
And while they may have rejected the bid from WFG, Community Savings said they are looking forward to another proposed merger with two other Alberta-based credit unions.
“We are looking forward to members approving the Board’s recommendation to merge with Common Wealth Credit Union and Servus Credit Union,” Haubrich said. “It would introduce province-wide access for our members, and the Community Savings Board of Directors remains confident that its recommendation is in the best interests of the members.”
If the merger should proceed, the three credit unions combined would provide province-wide access through 92 branches in 63 communities, 357,000 members, and assets approaching $9 billion and would create Canada’s third largest credit union.
Member voting on that merger is expected to take place soon.
The Rimbey Review contacted the local branch in an effort to gauge area reaction to the takeover offer, however all employees of Community Savings, including branch managers, were restricted from discussing either bid with the exception of Haubrich.