Butterfield Bank has agreed to acquire CIBC Caribbean Bank in a $1.8 billion deal.

CIBC Caribbean, which operates in ten countries in the region and is headquartered in Barbados, is the Caribbean arm of Canadian Imperial Bank of Commerce.

Butterfield will pay $1.09 billion in cash and $703 million in Butterfield shares for an aggregate purchase price of $1.794 billion, or $1.14 per CIBC Caribbean share.

After completion of the transaction, which is expected to close in the first half of 2027, CIBC will own an approximately 22 per cent stake in the combined entity.

Under the terms of Butterfield and CIBC’s shareholder agreement, CIBC will then initially have the right to appoint two directors to Butterfield’s board.

In a statement, Butterfield said the transaction would create “a leading banking and wealth management platform in international financial centres and attractive Caribbean markets, with approximately $29 billion in assets”.

Michael Collins, Butterfield’s chairman and chief executive officer, said: “Since Butterfield’s 2016 listing on the NYSE, we have successfully grown and enhanced profitability through bank and trust acquisitions.

“This deal combines two storied and complementary banks, with significant local scale advantages and time-honoured customer relationships in their respective core jurisdictions.

“The transaction will offer both scale and diversification to the benefit of all stakeholders, positioning Butterfield as a leading independent bank and wealth manager operating across international financial centres and attractive Caribbean markets. I look forward to welcoming our talented new colleagues and valued clients.”

Mark St Hill, chief executive officer of CIBC Caribbean, added: “For our clients, employees and communities, this combination brings together two organisations with shared values and a common focus on relationship banking, innovating and community impact. We look forward to building on our legacy as the region’s champion in financial services.”

Harry Culham, president and CEO, CIBC, commented: “The entire CIBC Caribbean team led by Mark St Hill has built a strong, client-focused bank across the region, and we look forward to realising the strategic benefits of this transaction to deliver more for all stakeholders.”

Under the terms of the agreement, which have been unanimously approved by the board of directors of Butterfield, Butterfield will acquire CIBC Investments (Cayman), the holding company for CIBC’s 91.7 per cent interest in CIBC Caribbean.

Butterfield will subsequently commence a mandatory takeover bid for the remaining 8.3 per cent of total outstanding shares of CIBC Caribbean held by minority shareholders, with the objective of acquiring full ownership of CIBC Caribbean, subject to applicable law and regulatory requirements.

CIBC Caribbean’s minority shareholders will be offered equivalent economic terms as CIBC, and will also have the option to elect to receive up to 100 per cent of their consideration in Butterfield shares, providing them with the opportunity to maintain the entirety of their investment in the combined organisation, should they choose to do so.

Houlihan Lokey, acting as financial adviser to the Special Committee of CIBC Caribbean’s Board of Directors, has provided an opinion to the Special Committee with respect to the fairness from a financial point of view of the consideration to be offered to CIBC Caribbean’s minority shareholders in the mandatory takeover bid. Assuming minority shareholders elect the same mix of cash and shares as CIBC, following completion of the takeover bid they would collectively own approximately 2 per cent of Butterfield.

In connection with the transaction, Butterfield has obtained commitments for $700 million of Tier 2 capital-qualifying subordinated debt financing expected to be raised prior to closing. Following completion of the transaction, the combined company is expected to maintain capital levels significantly above applicable regulatory thresholds on a consolidated basis, with a pro forma Common Equity Tier 1 (CET1) ratio above 12 per cent, and total capital above 19 per cent at closing.

The transaction is expected to close in the first half of 2027, subject to receipt of Butterfield shareholder and regulatory approvals and the satisfaction of customary closing conditions.

After the transaction, Butterfield’s ordinary shares will continue to be listed on the New York Stock Exchange and the Bermuda Stock Exchange, and Butterfield intends to undertake additional secondary share listings on the Barbados Stock Exchange, the Bahamas International Securities Exchange , and the Trinidad and Tobago Stock Exchange, subject to local listing and regulatory requirements.

The shareholder agreement will also provide for certain lock-up restrictions with respect to CIBC’s stake in Butterfield, and include customary standstill obligations and registration rights.

The Bermuda Monetary Authority (BMA) will continue to serve as the consolidated regulatory supervisor of Butterfield across all of its locations.