Royal Bank of Canada and the RBTT Financial Group (RBTT) today jointly announced an agreement to combine RBC’s Caribbean retail banking operations with RBTT’s through the acquisition of RBTT for a total purchase price of TT$13.8 billion (approximately US$2.2 billion).

The acquisition marks RBC’s return to Trinidad and Tobago, where it had maintained operations from 1902 to 1987.

Under the agreement, RBTT shareholders will receive per share consideration of TT$40 (approximately US$6.33) payable in a combination of cash (60%) and RBC common shares (40%).

The number of RBC common shares received by RBTT shareholders is subject to a plus/minus 10% “collar” based on an RBC share price of US$54.42, which is the average trading price for the five days ending September 28.

The RBTT board of directors says it approved the deal and unanimously recommends that RBTT shareholders vote in favour of the transaction.

The deal is expected to close by the middle of 2008 and will be accretive to RBC’s earnings per share in 2008.

RBC’s offer represents an 18% premium on the closing price of RBTT shares on September 28, and a 27% premium to the average share price of TT$31.44 over the last 12 months.

The combination will create one of the most expansive banking networks in the Caribbean, with a presence in 18 countries and territories across the region. With more than US$13.7 billion in assets, the combined operations will have 130 branches across the Caribbean, with more than 6,900 employees serving more than 1.6 million clients.

RBC’s expanded Caribbean retail banking operations will ultimately be headquartered in Trinidad and Tobago.

“This is a transformational acquisition for RBC in the Caribbean, one that extends our reach into many important markets, notably Trinidad and Tobago, Jamaica, and the Dutch Caribbean,” said Peter Armenio, RBC’s head of U.S. & international banking, in a news release. “RBTT provides RBC with extensive local insight and leadership in markets where we have little or no presence while significantly advancing our strategy to grow outside Canada.”

“This historic transaction provides a great opportunity for both companies” said Peter July, RBTT group chairman.

Senior management from both organizations will be integrated. Suresh Sookoo, RBTT group CEO and Ross McDonald, RBC’s current head of Caribbean banking, will share responsibility for leading a smooth transition. Sookoo will become CEO of RBC’s Caribbean retail banking operations following the successful integration of the two operations.

The deal is subject to closing conditions, including approval by regulators and RBTT shareholders.