Banc of California agreed to buy PacWest Bancorp in a deal that includes a US$400 million investment from Warburg Pincus and Centerbridge Partners, and gives the private-equity firms a 19 per cent stake in the combined company.
The combined company is expected to have roughly US$36.1 billion in assets, US$25.3 billion in loans and US$30.5 billion in deposits, as well as a footprint with more than 70 branches in California, the banks said in a release Tuesday.
The transaction — valued at just over US$1 billion, according to The Wall Street Journal — is expected to close late this year or in early 2024, the banks said.
The deal stands as a life raft of sorts for PacWest, which has been among the most beleaguered of regional banks since a crisis of investor confidence spread throughout the sector in March. PacWest sold off some of its loan portfolios in May and June to bolster liquidity and offloaded its real-estate lending unit. But the bank lost roughly 18 per cent of its deposits in the first half of this year, and its stock price has fallen 54 per cent since the start of 2023.
“Getting caught in the headlines could have happened to any bank. A liquidity run could have happened to anybody,” Banc of California CEO Jared Wolff said on a call Tuesday, according to Bloomberg. “The way that they’ve de-risked the franchise and moved it more toward a community bank and layered on some good deposit generators is going to be a really good fit for us.”
Wolff — who served as Pacific Western Bank’s president from 2002 to 2014 — will be chief executive of the combined company. John Eggemeyer, independent lead director on the board of PacWest, will chair the combined company’s board, which will consist of eight directors from Banc of California’s board, three from PacWest’s and one from Warburg Pincus.
Under the deal, PacWest stockholders will receive 0.6569 of a share of Banc of California for each share they own — about US$9.60, based on Banc of California’s closing price Tuesday. That is a roughly 25 per cent premium to PacWest’s US$7.69 closing price Tuesday.
The banks aim to repay US$13 billion in wholesale borrowings through the sale of assets, they said.
PacWest’s CEO, Paul Taylor said Tuesday’s deal “represent[s] significant immediate and long-term value beyond PacWest’s standalone strategic plan.”
“I am honoured and extremely proud of the PacWest team’s fortitude over the past several months amidst industry-wide volatility,” he added.
- Editor’s Note: This story is developing and will be updated.
