VICTORIA, RICHMOND and SURREY, B.C. – In a move designed to strengthen the Canadian credit union movement and make Canadian credit unions more competitive with banks, the boards of directors of Coast Capital Savings CU and Surrey Metro Savings CU-the second and third largest CUs in Canada, respectively – have agreed to merge and create Canada's second-largest CU in terms of assets, and the largest credit union in terms of membership. The combined credit union will have 2,000 employees, nearly 300,000 members – 196,000 from Coast Capital Savings and 100,000 from Surrey Metro Savings – and more than C$6 billion in assets. It will reach 90% of the population of the British Columbia Lower Mainland and southern Vancouver Island. British Columbia has been a "hotbed of merger activity" among credit unions in the past few years, said Tom Kirstein, chairman of Surrey Metro Savings. In 1996, there were 100 credit unions in the province, and now there are 65. Kirstein said the mergers are being driven by credit unions' need to reduce the overhead costs of delivering services to members so credit unions can remain competitive with banks. There are five big chartered banks in Canada, and 73% of credit union members have accounts with at least one of them, said Kirstein. "The banks' rates are very competitive with credit unions', and while their information technology capabilities used to lag behind credit unions', they've caught up." Coast Capital Savings, formed in December 2000 by a merger of Richmond Savings and Pacific Coast Savings Credit Union, has a network of 25 branches on Vancouver Island and the Mainland. The credit union has seven subsidiaries that provide insurance, investment, and real estate services. Surrey Metro Savings has 17 branches throughout the Fraser Valley. It ranked 4th in a list of 50 best companies to work for in Canada, leading all financial institutions. It has been awarded the gold level award from the United Way for 13 consecutive years. In 2001, more than $300,000 was donated to sponsor various events. Surrey Metro Savings was the first and remaining only credit union in Canada to become a public company with non-voting shares trading on the Toronto Stock Exchange. According to the terms of the tentative merger agreement between the two credit unions' boards, Coast will purchase Surrey's non-voting shares for C$21 per share, or 21% higher than their C$17.40 closing price on the Toronto Stock Exchange on March 4. The purchase price will be settled in cash. In addition, Surrey's shares will be delisted following closure of the transaction Surrey shareholders will vote on the merger at a May 22 meeting. The merger requires a 66 2/3 vote in favor from Surrey members, as well as holders of non-voting shares which trade on the Toronto Stock Exchange. Coast Capital members won't have to vote on the merger since it involves a transfer of assets from Surrey Metro Savings to coast Capital Savings. The merger will offer members 42 branches across the Fraser Valley, Lower Mainland and Vancouver Island and is subject to Coast Capital Savings and Surrey Metro Savings entering into a definitive business combination agreement and receipt of all requisite regulatory, creditor, and third party approvals. Assuming all the approvals are received, the merger will be effective at the end of June 2002. Surrey Metro members will automatically become members of Coast Capital Savings. The proposed structure of the new board includes equal representation of six members from Coast Capital Savings' two existing geographic regions, and from Surrey Metro Savings. Since "18 is not a workable number for a board," said Kirstein, the number will be reduced to 12 or nine over time either through election or resignation. The selection of the new credit union's president will be decided post-merger by the board. The name of the new credit union will be Coast Capital Savings Credit Union. Any future name change will be approved by members The boards of both credit unions have guaranteed there will be no layoffs of employees at the branch level of either credit union, but there will be some consolidation of positions at the headquarters level. The merger with Coast Capital Savings is not Surrey Metro Savings' first merger attempt. It tried to merge in 1993 with First Heritage Savings CU – now Envision CU, the fourth largest CU in Canada – but its offer was turned down. In 1999, Canada Trust offered to merge with Surrey Metro, but Kirstein said the members turned down the bank's offer "because they wanted us to remain a credit union." According to the Canadian Department of Finance, credit unions in British Columbia have about a 20% market share. The country's credit union movement includes 830 credit unions and 1,351 affiliated caisses populaires, a form of credit union located in Quebec. They have combined assets of approximately $62.1 billion and serve almost 10 million members. About 33% of the population belong to credit unions, giving Canada the highest per capita membership in the worldwide credit union movement. -

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