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PacWest Enters into Agreement to Buy CU Bancorp's Subsidiary

On Thursday, PacWest Bancorp PACW announced an agreement with CU Bancorp CUNB, a California-based bank, to acquire its subsidiary California United Bank in a cash and stock deal, valued at $705 million. The merger is expected to close in the fourth quarter of 2017.

Per the agreement, California United Bank will merge with Pacific Western Bank, a subsidiary of PacWest Bancorp. Though it has received approval from directors of both the companies, the deal is yet to get approval of the shareholders of CU Bancorp and the concerned regulatory authorities.

According to the figures provided as of Dec 31, 2016, the deal shall result in a combined company with $25 billion worth of assets operating from 87 branches.

However, shares of PacWest reflected a slight decline since the announcement of the deal, perhaps due to the bearish trends prevailing in the market.

Terms of the Agreement

The merger has been valued at $39.45 per share of CU Bancorp based on PacWest’s closing price of $51.72 on the day before the announcement.

The acquired company’s shareholders will be entitled to receive $12 in cash and 0.5308 shares of PacWest for each share held in CU Bancorp.

The deal has been presented to the U.S. federal income tax authorities for qualifying as a tax-free restructuring move.

Our Viewpoint

The deal should strengthen the company’s position in California. Further, the deal reflects the company’s strong capital and balance sheet position.

Shares of PacWest gained 44.4% in the last one year, outperforming the 40.8% growth of the Zacks categorized Banks – West industry.

Currently, PacWest carries a Zacks Rank #3 (Hold).

A couple of better-ranked finance stocks are SVB Financial Group SIVB and Preferred Bank PFBC. Both these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SVB Financial’s earnings estimates were revised upward by 1.8% for the current year, in the past 60 days. Also, its share price jumped 82.9%, over the last one year.

Preferred Bank’s current year earnings estimates were revised 0.7% upward, over the last 60 days. Further, its shares increased 76.7%, in the last one year.

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Preferred Bank (PFBC): Free Stock Analysis Report
 
PacWest Bancorp (PACW): Free Stock Analysis Report
 
SVB Financial Group (SIVB): Free Stock Analysis Report
 
CU Bancorp (CA) (CUNB): Free Stock Analysis Report
 
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