Banc of California and PacWest Bancorp signed an agreement to combine the two banks in an all-stock merger under the Banc of California name. Banc of California will be the legal acquirer, and Banc of California N.A. will merge with Pacific Western Bank, which will take the Banc of California name and apply to become a Federal Reserve member.
The combined company, headquartered in Los Angeles, is expected to have approximately $36.1 billion in assets, $25.3 billion in total loans, $30.5 billion in total deposits and more than 70 branches in California.
The merger deal includes a commitment to invest in $400 million of new common equity of the combined company by affiliates of funds managed by Warburg Pincus, LLC and certain investment vehicles managed or advised by Centerbridge Partners, LP. The combined company will repay around $13 billion in wholesale borrowings, funded by sales of assets as a result of the transaction, and excess cash.
Banc of California President and CEO Jared Wolff will retain his roles at the combined company. John Eggemeyer, independent lead director on the board of PacWest, will become the chairman of the board of the combined company. The board of directors will have 12 members: eight from the existing Banc of California board, three from the existing PacWest board, and one from Warburg Investors.
“This transformational merger will create a robust, well-capitalized and highly liquid institution poised to deliver exceptional service to even more California businesses and communities,” Wolff said in a release. “We believe both Banc of California and PacWest stockholders will benefit from the compelling economics of the combined company and its enhanced ability to deliver profitable and sustainable growth. Out of the gate, the combined company will have the strength and market position to support the banking needs of small and medium-size businesses in California and to capitalize on the opportunities created for stronger financial institutions in the wake of the recent banking industry turmoil.
“Due to the high degree of familiarity between our businesses, we anticipate a smooth integration that will enable us to quickly and effectively capitalize on the long-term opportunities unlocked by the strength of our combined platform. Both institutions follow a client-first, relationship-based approach to serving our clients and communities while emphasizing prudent risk management. We believe that uniting the talent and expertise from both organizations, along with our cultural similarities and deep familiarity with each other’s business, will accelerate the execution and delivery of strong and growing franchise value for all stakeholders.”
PacWest President and CEO Paul Taylor called the merger a “tremendous opportunity” for PacWest’s stockholders and customers, “representing significant immediate and long-term value beyond PacWest’s standalone strategic plan.
“I am honored and extremely proud of the PacWest team’s fortitude over the past several months amidst industry-wide volatility,” Taylor said. “With the combined strength of both institutions, new capital from investors that are committed to the strategic vision and value creation of this merger, and a proven track record of successful integrations, the combined company will be well-positioned to provide significant value for the long term to all of our constituents."
Todd Schell will join the board of directors from Warburg Pincus.
“We are excited to back the strategic combination of two institutions we know well and respect. The transaction provides an opportunity to execute a highly accretive balance sheet repositioning which generates substantial incremental earnings and positions the combined company for the next leg of profitable growth,” Schell said.
The parties expect the closing of the merger to occur in late 2023 or early 2024, subject to regulatory approvals and requisite approval by the stockholders of each company, and the concurrent closing of the equity capital raise.