Regional American bank PacWest announced its merger with Banc of California, taking further steps to self-rescue in the aftermath of a banking industry crisis.
According to a statement released on Tuesday, the two companies will unite through an all-stock merger transaction, with PacWest being integrated into Banc of California, and Banc of California, based in North Carolina, merging into PacWest. Additionally, each share of PacWest will yield 0.6569 common shares of Banc of California for its shareholders.
Analysts point out that while the merger's value isn't substantial by acquisition standards, just slightly above $1 billion, it marks a significant milestone for the U.S. banking industry, which faced turbulence and ongoing health issues earlier this year. This transaction doesn't require governmental assistance, as the government had intervened to save other banks and brokerage firms earlier in the year.
As part of the transaction, Warburg Pincus and Centerbridge Partners will invest $400 million in new equity. The two banks stated they will sell assets to repay $13 billion in wholesale loans.
Upon the completion of the transaction and asset sales, the merged company is expected to possess $36.1 billion in assets, $25.3 billion in loans, and $30.5 billion in deposits.
Shortly before, the Wall Street Journal reported that Banc of California's stock price rose approximately 11% in regular trading upon news that the deal was nearing completion, while PacWest's fell by 27%.
This merger essentially translates into PacWest being swallowed by the significantly smaller Banc of California. As of the end of March, Banc of California had $10 billion in assets, which is less than a quarter of PacWest's size.
However, in the banking industry crisis that erupted in March, PacWest took a heavier hit, losing 18% of its deposits in the first half of the year and seeing its stock price plummet by 66% since the beginning of the year. In contrast, Banc of California lost nearly 4% of its deposits and has seen its stock price drop by 7.7% this year.
