Banc of California to Acquire PacWest Bancorp in All-Stock Deal, Shares Soar
WHAT YOU SHOULD KNOW
- Banc of California has agreed to acquire PacWest Bancorp in an all-stock deal, leading to a significant rise in both companies’ share prices.
- The acquisition is seen as beneficial for PacWest shareholders and strategically important for Banc of California, providing an improved profitability profile for the latter.
- PacWest had faced struggles and came under pressure following the collapse of three regional lenders earlier this year, leading to asset sales and concerns about its balance sheet.
PacWest Bancorp experienced a significant surge of nearly 38% in premarket trading after Banc of California, its smaller rival, announced its intention to acquire the bank in an all-stock deal worth $1.1 billion. As part of the deal, Banc of California will offer 0.6569 shares to each PacWest stockholder. Interestingly, PacWest’s stock was already trading at $10.47, higher than the offer price of $9.60 per share, indicating investors’ optimism about the acquisition.
Analysts and industry experts see the sale of PacWest as a sensible move, considering the challenges the bank has faced since the March banking panic. The acquisition is viewed as a strategic step for Banc of California, leading to a structural transformation and anticipated improved profitability by 2024. Additionally, PacWest’s decision to sell its $3.54 billion lender finance portfolio to Ares Management has eased concerns about the bank’s balance sheet health.
PacWest has been taking steps to reassure investors and depositors after facing pressure following the collapse of three regional lenders earlier this year, which triggered industry turmoil similar to the 2008 financial crisis. Although the sale announcement brings some relief, analysts believe the banking panic around U.S. regional banks has subsided, especially after observing positive earnings reports from PNC and Western Alliance. On a related note, private equity firms Warburg Pincus and Centerbridge Partners have committed to investing $400 million in Banc of California’s buyout deal.
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