Bank of Nova Scotia has signed agreements to purchase 79% of Banco del Desarrollo, Chile’s seventh largest bank for US$810 million. These agreements are the first stage in a plan to purchase up to 100% of Banco del Desarrollo, Scotiabank announced today.

The 79% stake is to be purchased from Sociedad de Inversiones Norte Sur S.A., a Chilean investment firm that holds 39% of Banco del Desarrollo, Credit Agricole S.A. of France, which holds 24% of Desarrollo, and Italian bank Intesa Sanpaolo S.P.A. (16%). The agreements include provisions to adjust the price based on due diligence. As required by local rules, Scotiabank will be making a public share offering on the same terms and expects to acquire up to 100% of Banco del Desarrollo, which would be valued at US$1.03 billion.

“This is a unique opportunity to increase our market penetration in one of the most developed and attractive markets in Latin America,” said Rick Waugh, Scotiabank president and CEO, in a release. “It is consistent with our overall strategy of driving sustainable revenue growth by building our presence in countries where we have existing operations.”

“Today’s announcement is good news for the Chilean market and for micro, small and medium sized businesses,” said Vicente Caruz Middleton, President of Banco del Desarrollo. “We see this agreement as an opportunity for Banco del Desarrollo to extend its horizons while staying faithful to its original mission and sharing Banco del Desarrollo’s know-how and business model with an experienced international partner.”

With total assets of more than US$5.1 billion, Banco del Desarrollo has a nationwide network of 74 branches and specialized skills in mid-market commercial lending, small business and micro business lending, and consumer finance. Scotiabank’s Chilean subsidiary, Scotiabank Sud Americano, has total assets of US$3.5 billion and 57 branches providing services in retail banking and personal lending, wealth management, corporate and investment banking services, commercial lending and insurance. The combined operations will create Chile’s sixth largest bank. The complementary nature of the two organizations should result in the vast majority of positions being maintained. Also, given the unique market segments, two brands will be maintained to continue to meet the individual banking needs of all customers.

Banco del Desarrollo was founded with a mission to support community and social development by providing banking services to small and medium sized companies, community organizations and individuals entering the financial services market. Scotiabank says it shares Banco del Desarrollo’s commitment to serving these markets and to helping all customers become financially better off.

Scotiabank first entered the Chilean market in 1990 with a 25% stake in Banco Sud Americano. In 2000, it increased its ownership to 98.8% and, in 2001, re-branded the subsidiary as Scotiabank Sud Americano.

The agreements are subject to due diligence and the purchase is regulatory approvals and is expected to close in November.