Bank mergers look to be back on the table after a regional banking crisis roiled the industry earlier this year.
Banc of California
(ticker: BANC) is merging with
PacWest Bancorp
(PACW) in an all-stock deal, the companies said after the close of trading on Tuesday. The Wall Street Journal reported that the banks were in advanced talks during the trading day, sending Bank of California shares up 11% and PacWest stock down 27%.
PacWest shareholders will receive 0.6569 of a share of Banc of California common stock for each share of PacWest common stock they hold, the companies said. The deal is expected to close at the end of 2023 or beginning of 2024, subject to regulatory and shareholder approvals.
At the conclusion of the merger, the combined entity will have $36.1 billion in assets, $25.3 billion in total loans, and $30.5 billion in deposits. At the close of the first quarter PacWest had $44 billion in assets, while Banc of California had $10 billion. Last month PacWest sold $3.5 billion of loans to Ares Capital after selling its real estate lending unit and a portfolio of real estate loans in May.
“This transformational merger will create a robust, well-capitalized and highly liquid institution poised to deliver exceptional service to even more California businesses and communities,” Jared Wolff, chief executive of Banc of California said Tuesday. “Due to the high degree of familiarity between our businesses, we anticipate a smooth integration that will enable us to quickly and effectively capitalize on the long-term opportunities unlocked by the strength of our combined platform.”
Wolff will serve as president and CEO of the combined bank, which will use the Banc of California name. The combined entity will also apply to become a Federal Reserve member.
Centerbridge Partners and Warburg Pincus agreed to invest $400 million in equity into the combined bank. The funds will be used for balance sheet repositioning and other savings.
While the regional banking turmoil that led to the collapse of Silicon Valley Bank and two others is largely in the rearview mirror, smaller banks are likely looking to merge, hoping that greater scale will help them to compete and avoid the pitfalls that led to the failure of other banks. PacWest was able to avoid collapse during the tumult in March and April, but its shares suffered amid deposit outflows.
Shares of Beverly Hills-based PacWest are down 66% this year while Banc of California shares are off by 8%.
Write to Carleton English at [email protected]
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