Merger Completion by Early Next Year
M&A Value of 1 Billion USD
Proceeding Without US Authorities' Intervention
PacWest Bancorp, which faced bankruptcy due to a massive bank run in March, is set to be acquired by California Bank. Analysts suggest that the bankdemic (bank + pandemic) triggered by the collapse of Silicon Valley Bank (SVB) and leading to a crisis across the financial sector has come to an end.
On the 25th (local time), according to major foreign media including Bloomberg, the two companies announced that they have agreed on California Bank acquiring PacWest Corp without intervention from U.S. financial authorities. Jared Wolff, CEO of California Bank, stated, "Through this merger, we will become a bank with more capital and abundant liquidity, capable of providing excellent services to the California community."
The M&A deal is valued at $1 billion (1.2787 trillion KRW). As a result of the merger, PacWest shareholders will own 47% of the merged entity, while California Bank shareholders will hold 34%. According to The Wall Street Journal (WSJ), PacWest shareholders are expected to receive 0.66 shares of California Bank stock per share. The remaining 19% stake, worth $400 million, will be purchased by U.S.-based private equity firms Centerbridge Partners and Weberg Finkus.
The two companies plan to complete the merger process as early as the end of this year or by early next year at the latest. Upon completion, the merged bank will have assets of $36 billion, loans of $25.3 billion, and deposits of $30.5 billion. The number of branches in the California region under the merged company will expand to 70.
Both companies believe this M&A will be an opportunity to regain lost market trust and seek a turnaround. PacWest’s stock price has plummeted 67% this year amid turmoil caused by the bank run. In the first quarter of this year, deposits decreased by 16.9%, making it the fourth bank expected to fail after First Republic. California Bank’s stock price also fell 28% over the past year. The companies predict that the merged bank’s stock could rise to as much as $1.80 next year.
The market views this merger as a significant milestone for banks facing solvency issues. Unlike mid-sized banks that faced liquidity crises in March and were absorbed by large banks with U.S. financial authorities’ intervention, this merger was achieved solely through the efforts of the two companies, which has been highly praised.
Buoyed by these expectations, PacWest and California Bank stocks showed strength in after-hours trading. On the day’s New York Stock Exchange close, California Bank rose 11.17% to $14.62, while PacWest fell 27.04% to $7.69. In after-hours trading, California Bank’s stock surged 11%, and PacWest’s stock price jumped 31.34%.
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