An expected affirming membership vote in mid-June and the tidying up of a few small regulatory details are among the tasks that remain before what is arguably the most significant merger in Canadian credit union history becomes a fait accompli.

Under this historic amalgamation, Credit Union Central of British Columbia is merging with Credit Union Central of Ontario to create what is hoped will one day be the basis for a full-blown national organization of provincial credit unions.

(Even though there is a Credit Union Central of Canada in existence, it is a trade association that represents the industry, lobbies the federal government and provides limited services.)

But even this first step of uniting Canada’s two largest credit union centrals means the new, yet to be named organization will represent more than 200 credit unions in the two provinces, with a total of 2.7 million members and assets under administration of more than $7.4 billion.

It will also create a large liquidity pool offering lending and investment options, along with comprehensive payment and settlement services and a leading Internet banking platform.

The two centrals will put the merger proposal to their respective memberships in mid-June; the transaction is expected to close in late September.

“After the vote, there might be a few regulatory loose ends to tie up. But other than that, there’s really nothing we expect to stand in the way of this amalgamation,” says Daniel Burns, chairman of CUC of B.C. “This project has been progressing extremely well.”

Adds CUC of Ontario’s spokesman, Art Cham-berlain: “Our board and members are pretty excited about the opportunity to join forces with British Columbia to create a larger organization that will allow us to offer more products and services.”

Under the terms of the agreement, CUC of B.C. will acquire the assets and assume the liabilities of CUC of Ontario at fair market value. A regulatory change by cabinet order-in-council is required in Ontario to allow Ontario credit unions to maintain their statutory liquidity with CUC of B.C.

The new entity will have its headquarters in Vancouver, but will maintain trade association offices in both Vancouver and Mississauga, Ont.

New shares will be issued in proportion to provincial credit union assets. Hence, Ontario credit unions will receive 31% of voting shares, while B.C. credit unions will receive 69%.

“The only reason we’re acquiring Ontario’s assets is because both the B.C. and Ontario teams of accounting, legal and tax experts recommended we do it this way,” Burns says. “We’re in a relatively favourable regulatory environment here in British Columbia.”

The new agreement is particularly satisfying for both provincial organizations because a previous attempt to merge the two in 2003 failed. However, lessons learned from the earlier attempt appear to have been applied successfully in the current initiative.

“There was a lot of support in the last merger go-round, and a great deal of disappointment when it failed,” Chamberlain says. “That process simply got bogged down in details. So, this time, both parties took a more streamlined approach.”

The strategy behind this merger attempt was first to amalgamate the two organizations, then later, utilizing the merged and expanded new board of directors, iron out the details.

“In other words, rather than front-end load the deal with details, once we have the basic merged organization in place, we can all sit down together at the same board table and decide our future together,” Burns says.

“We’ve been able to do it this way because we all believe in the fundamentals of the deal,” he adds, “and we also all believe that we’re better and stronger together.”

In fact, Burns says, unification and greater efficiencies are among the best tools credit unions have to meet competition in the marketplace from the chartered banks.

“All credit unions across the country will tell you that in the future we’ll just need one central organization,” he says. “With the high cost of ATMs and other kinds of electronic and Internet protocol systems, you really have to combine your resources to be competitive.

“There are economies of scale to be had here,” he adds, “but the real driver behind this merger is to streamline the decision-making so we do it around just one board table.”

Amalgamation of the B.C. and Ontario centrals is seen by both parties as just the first step in a journey toward a full national credit union central organization stretching from sea to sea.

@page_break@“Everyone at our negotiation table hopes that once we’ve got the framework built between British Columbia and Ontario, other provinces will want to join,” Chamberlain says.

“The other provincial credit union centrals are adopting a wait-and-see attitude, and that’s OK,” adds Burns. “But once they see that we’ve actually been able to do this merger, they’ll be more apt to join us because a completed merger will improve our credibility.”

In fact, credit union centrals in Manitoba and Alberta have already requested information meetings on the B.C.-Ontario merger. IE