2 CA banks merging into new $36B bank amid post-crisis consolidations.
2 CA banks merging into new $36B bank amid post-crisis consolidations.
California Banks Banc of California and PacWest Bancorp Announce Merger, Shares Surge
In an exciting turn of events, Banc of California and PacWest Bancorp have announced a merger that has sent their shares soaring. The all-stock deal will create a new bank with impressive numbers – $36 billion in combined assets and $30.5 billion in total deposits. This merger is just one of several that have taken place in recent months, a result of the US banking crisis in March.
Shares of PacWest Bancorp experienced a remarkable surge of 31.3% to $10.10 per share in after-hours trading upon the announcement of the merger. This surge more than made up for the 27% slump the stock had experienced earlier that day. Banc of California’s shares also saw a significant jump of 8.4% to $15.85 per share, building on the 11% rise seen the day before.
The completion of the all-stock deal is expected by early 2024. Once completed, the new bank will have more than 70 branches located throughout California. The bank will be led by Jared Wolff, the current CEO of Banc of California. With a total of $25.3 billion in loans and $30.5 billion in deposits, the new bank will undoubtedly be a significant player in the California banking landscape.
To finance the merger, both banks have agreed to sell $400 million worth of new shares to private equity firms Warburg Pincus and Centerbridge Partners. This injection of funds will help ensure the smooth transition and consolidation of operations.
Speaking on a conference call with analysts, Jared Wolff explained the opportune timing of the merger. “Over the past 18 months, the competitive environment in California has changed dramatically,” he stated. “We’ve seen many other banks either completely exit or significantly pull back from California. As a result, there’s a sizable opportunity.” This merger allows Banc of California and PacWest Bancorp to leverage their strengths and seize the sizable opportunity in the California market.
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Analyst Timothy Coffey from Janney Montgomery Scott likened the merger to a “marriage of convenience.” Both banks operate in the same geographies and focus on commercial assets, making them well-suited for this union. This merger comes after more than two months of speculation about PacWest considering a sale. It also follows the US banking crisis in March, which witnessed the collapse of regional banks like Silicon Valley Bank and Signature Bank in New York.
The US banking industry has seen significant consolidation activity this year, with notable acquisitions by major players. JPMorgan acquired First Republic Bank, First Citizens Bank acquired Silicon Valley Bank, and New York Community Bancorp secured most of Signature Bank. These mergers and acquisitions are reshaping the banking landscape, providing opportunities for growth and increased market share.
The merger between Banc of California and PacWest Bancorp is an exciting development in the California banking sector. With their combined assets and deposits, the new bank will be well-positioned to cater to the evolving needs of consumers and businesses in the state. As the banking industry continues to undergo transformation and consolidation, we can expect more strategic alliances and exciting announcements in the future.
