Banc of California and PacWest Bancorp have announced an all-stock merger that will create a powerhouse bank with assets totaling $36 billion. The merger is expected to reshape the banking landscape in California, establishing a formidable financial institution with over 70 branches in the state.
To finance the transaction, the lenders will sell $400 million in new shares to private equity firms Warburg Pincus and Centerbridge Partners. This strategic move will facilitate the merger and pave the way for a new banking giant in the region.
Under the terms of the agreement, PacWest shareholders will receive 0.6569 shares of Banc of California for each existing share they hold. The merger will lead to the formation of a bank with total loans amounting to $25.3 billion, signifying a robust and well-capitalized financial entity.
The newly formed bank will be headquartered in Los Angeles and will be led by Jared Wolff, the current CEO of Banc of California. This move comes as both banks have experienced a surge in their respective stock prices following the announcement of the agreement. PacWest shares rose by an impressive 34%, while Banc of California saw a 9% increase, indicating the market’s optimism towards the merger.
Treasury Secretary Janet Yellen recently suggested that more mergers between midsize U.S. financial institutions may be necessary in the aftermath of recent bank failures. The consolidation of resources and expertise through mergers like the one between Banc of California and PacWest Bancorp could contribute to the overall stability and resilience of the banking sector.
PacWest’s decision to sell assets to bolster its financial position appears to have been a strategic move to strengthen its position during the merger process. As concerns linger regarding the financial stability of some regional banks despite the abatement of volatility and deposit outflows, mergers like this one may provide a pathway to greater financial strength and security.