Banc of California (BANC.N) and PacWest Bancorp (PACW.O) have announced a merger agreement that will create a $36 billion bank with a strong presence in California.
The deal, which is expected to close in the second quarter of 2022, will also see the lenders raise $400 million from private equity investors Warburg Pincus and Centerbridge Partners.
The merger comes as the regional banking sector recovers from the fallout of three bank failures earlier this year, which rattled the confidence of investors and regulators. PacWest was one of the banks that suffered losses due to its exposure to the troubled lenders.
The combined bank will operate under the Banc of California name and will be headquartered in Los Angeles. It will have $25.3 billion in total loans and more than 70 branches across the state. It will be led by Banc of California CEO Jared Wolff, who will also serve as chairman of the board.
Under the terms of the deal, PacWest shareholders will receive 0.6569 Banc of California shares for each PacWest share they own, representing a 7% premium based on Monday’s closing prices. The transaction values PacWest at about $2.8 billion.
In addition, Warburg Pincus and Centerbridge Partners will invest $400 million in new Banc of California stock at a price of $12.30 per share, representing a 10% discount to Monday’s closing price. The private equity firms will own about 14% of the combined bank after the merger.
The deal is expected to generate annual cost savings of about $100 million and boost earnings per share by more than 20% in 2023. The lenders said they have received commitments for regulatory approvals and expect to complete the merger in the second quarter of next year, subject to shareholder approvals and other customary closing conditions.