In a joint press release, Banc of California and PacWest announced that the two companies have entered into a “transformational” merger agreement. The deal will create a combined banking entity with more than $36 billion in assets.
The merger agreement
According to reports, the merger agreement involves an all-stock purchase of PacWest Bancorp valued at roughly $1 billion. When the merger is complete, the combined entity will operate as Banc of California. The deal also includes investment agreements with private equity firms Warburg Pincus and Centerbridge Partners. The investors are expected to provide $400 million in funds. The press release confirmed that the funds will be used to restructure the new bank’s balance sheet.
Banc of California CEO Jared Wolff praised the merger agreement. He suggested that the deal will benefit stockholders of both companies, and claimed:
“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.”
An end to PacWest’s troubles
For much of this year, industry observers have worried that PacWest could follow in the footsteps of other failed banks. Some have noted that the bank’s business model was comparable to First Republic Bank, which was shuttered earlier in 2023. Prior to the merger announcement, the company had been selling assets to avoid a regulatory closure.
With the announcement of this merger agreement, concerns about a PacWest failure are likely to recede. Meanwhile, PacWest Bancorp stock prices rose by 29% on Wednesday, as investors expressed optimism about the deal. The company’s share price had declined by almost two-thirds since the beginning of the year. Banc of California shares rose on Wednesday as well, creeping up 3.4%.