The Pacific Western Bank (PacWest) in the United States announced its merger with Banc of California in the aftermath of the banking crisis, furthering its self-rescue efforts.
According to a statement released on Tuesday local time, the two companies will merge through an all-stock transaction, with PacWest merging into Banc of California, while Banc of California in North Carolina will merge into PacWest. In addition, each PacWest shareholder will receive 0.6569 shares of Banc of California common stock.
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Analysts believe that although the value of this merger is not significant according to merger standards, slightly exceeding $1 billion, it is an important milestone for the US banking industry, which experienced turmoil earlier this year and still faces health issues. The transaction does not require government assistance, as the government has already intervened to rescue other banks and brokerages earlier this year.
As part of the deal, Warburg Pincus and Centerbridge Partners will invest $400 million in new equity. Both banks have stated that they will sell assets to repay $13 billion in wholesale loans.
After the completion of the transaction and asset sales, the merged company is expected to have $36.1 billion in assets, $25.3 billion in loans, and $30.5 billion in deposits.
Earlier, the Wall Street Journal reported that after the deal was about to be reached, Banc of California's stock price rose by about 11% in regular trading, while PacWest's stock price fell by 27%.
In fact, this merger is a case of PacWest being acquired and merged by the much smaller Banc of California. As of the end of March, Banc of California had $10 billion in assets, less than a quarter of PacWest's size.
However, PacWest was hit harder in the banking crisis that erupted in March, losing 18% of its deposits in the first half of this year and experiencing a 66% drop in its stock price. In comparison, Banc of California lost nearly 4% of its deposits and its stock price fell by 7.7% this year.
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As of the time of writing, Banc of California has a market value of $850 million, while PacWest has a market value of $910 million.

BANC

This merger is not of great value, but it is an important milestone for the US banking industry, which has been in turmoil earlier this year and still faces health issues.

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