Dec 2 (Reuters) - Fairstone Bank said on Tuesday it will buy peer Laurentian Bank in a C$1.9 billion all-cash deal, snapping up the Canadian lender which had earlier intended to sell itself and divest businesses.

The deal is at a premium of 20% to Laurentian's shares at close as of December 1, according to the banks.

The acquisition, expected to close by late 2026, will allow Fairstone Bank to expand its commercial real estate business nationwide, with a focus on Québec.

"We view Québec as a key market and are excited to continue building our presence with the expertise we're acquiring from Laurentian Bank," said Scott Wood, President and CEO of Fairstone Bank.

Laurentian Bank, which launched a strategic review in July 2023, said it had explored options but failed to attract a buyer, ending the process later that year.

The Canadian bank cut jobs and closed its equity research unit as part of a restructuring it resumed last year, in an attempt to pacify investors.

"This (acquisition) announcement is aligned with the acceleration of Laurentian Bank's commercial specializations, as announced in our 2024 Strategic Plan," Laurentian Bank CEO Éric Provost said.

Fairstone will buy all of Laurentian's shares at C$40.50 in cash. Its shares closed at C$33.76 on Monday on the Toronto stock exchange. Laurentian's stock has gained about 16.6% so far in 2025.

Separately, National Bank of Canada will acquire the retail and SME (Small and Medium-sized Enterprise) banking portfolios of Laurentian.

"Picking up Laurentian's retail and small business books should fit neatly into National's existing strength in Quebec, giving it more client deposits and relationships," said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.

As of July 31, 2025, Laurentian's retail loans stood at about C$3.3 billion and deposits at C$7.6 billion, while SME loans totaled roughly C$0.8 billion and deposits C$0.6 billion, the banks said.

(Reporting by Ateev Bhandari and Pritam Biswas in Bengaluru; Editing by Anil D'Silva and Shailesh Kuber)

By Ateev Bhandari and Pritam Biswas