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PacWest Bancorp’s stock jumped more than 30% in after-hours trading Tuesday after the company said it had agreed to be acquired by Banc of California Inc. in an all-stock merger backed by two private-equity firms. The merger comes as PacWest looks to put a rocky period behind it.
Under the terms of the merger agreement, PacWest
PACW,
stockholders will receive 0.6569 of a share of Banc of California
BANC,
common stock for each share of PacWest common stock. Based on closing prices on Tuesday, the deal values PacWest at $9.60 a share, a premium over its closing price of $7.67 a share on Tuesday.
Warburg Pincus and Centerbridge will provide $400 million in equity.
PacWest stockholders will own 47% of the outstanding shares of the combined company, while the private-equity investors will own 19% and Banc of California shareholders will have 34%.
PacWest said that it is the company being acquired and that it will change its name to Banc of California. PacWest said it will be the “accounting acquirer,” with fair-value accounting applied to Banc of California’s balance sheet at closing.
Banc of California CEO Jared Wolff will retain the same role at the combined company.
The combined company will repay about $13 billion in wholesale borrowings to be funded by the sale of assets, “which are fully marked as a result of the transaction, and excess cash,” the companies said.
The merged company is currently projecting about $36.1 billion in assets, $25.3 billion in total loans, $30.5 billion in total deposits and more than 70 branches in California.
John Eggemeyer, the independent lead director at PacWest, will be chair of the board of the combined company following the merger.
The board of directors of the combined company will consist of 12 directors: eight from the existing Banc of California board, three from the existing PacWest board and one from the pair of private-equity firms led by Warburg Pincus.
Citing sources close to the deal, the Wall Street Journal had reported earlier that a tie-up was imminent.
In regular trading Tuesday, PacWest’s stock ended 27% down; trading was halted for volatility following the report of the deal. Shares shot up 31.3% in after-hours trading.
Banc of California’s stock rose 11% but was later halted for news pending as well. The stock rose almost 9% in after-hours trading on Tuesday.
At last check, PacWest’s market capitalization was about $1.2 billion, while Banc of California’s was about $764 million. Combined, the business would be worth about $2 billion.
PacWest’s big share-price move on Tuesday marks the latest in a volatile few months for the Beverly Hills, Calif., bank, which was founded in 1999.
Investors had speculated that the bank could be the next to fail after Silicon Valley Bank and Signature Bank failed in March and First Republic Bank was taken over by JPMorgan.
Also on Tuesday, PacWest said it lost $207.4 million, or $1.75 a share, in its second quarter, as it got a hit from items related to loan sales and restructuring of its lending unit Civic. The loss contrasts with earnings of $122 million, or $1.02 a share, in the year-ago period.
Analysts polled by FactSet expected the bank to report a loss of 58 cents a share in the quarter.
PacWest disclosed in recent months that it was exploring strategic alternatives while it sold off parts of its business to raise cash to strengthen its balance sheet. It sold a loan portfolio to Ares Management Corp.
ARES,
in a move to generate $2 billion.
It also sold a portfolio of loans to Kennedy-Wilson Holdings Inc.
KW,
which then sold part of the portfolio to Canada’s Fairfax Financial Holdings Ltd.
FFH,
Also read: PacWest sparks regional-bank rally after unveiling plan to sell loans worth $2.6 billion
In May, PacWest sold its real-estate lending portfolio to Roc360.
Also in May, PacWest’s stock dropped more than 20% after it said it had lost 9.5% of its deposits amid market volatility.
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