PacWest Bancorp To Buy CapitalSource In $2.3 Bln Cash, Stock Deal

(RTTNews) - Bank holding company PacWest Bancorp (PACW) agreed Monday to acquire financial services company CapitalSource, Inc. (CSE) in a cash and stock deal valued at about $2.3 billion. The merger will create a commercial bank with over $15 billion in assets. The deal is currently expected to close in the first quarter of 2014.

The deal will see CapitalSource shareholders receiving $2.47 in cash and 0.2837 shares of PacWest common stock for each share of CapitalSource common stock, with the total consideration valued at about $11.64 per share, based on PacWest's closing price of $32.32 on Friday.

The offer price represents a premium of about 20 percent over CapitalSource's closing price of $9.69 on Monday.

Los Angeles, California-based CapitalSource is the parent of CapitalSource Bank, a California Industrial Bank with about $8.7 billion in assets at June 30, 2013 and 21 branches located in southern and central California.

"This transaction represents the combination of two outstanding organizations. CapitalSource has built an enviable lending platform and growth engine. PacWest has a valuable community banking franchise and a low cost deposit base driven by our high percentage of noninterest bearing demand deposits," PacWest CEO Matt Wagner said in a statement.

The deal will combine two valuable franchises to create the 6th largest publicly-owned bank and 8th largest commercial bank headquartered in California. The combined company will be called PacWest Bancorp and the combined subsidiary bank will be called Pacific Western Bank.

Meanwhile, The CapitalSource national lending operation will continue to do business under the name CapitalSource as a division of Pacific Western Bank.

"PacWest is the perfect partner to accelerate and expand our capacity to serve the credit needs of middle market and small businesses and to broaden the products and services we can offer to our deposit customers here in California once the merger into Pacific Western Bank is completed," CapitalSource Bank Chairman and CEO Tad Lowrey noted.

On a pro forma consolidated basis, the combined company would have had about $15.4 billion in assets with 96 branches throughout California as of June 30.

Upon closing of the deal, the existing shareholders of PacWest are expected to own about 45 percent of the outstanding shares of the combined company and CapitalSource shareholders are expected to own about 55 percent.

Upon completion of the deal, the combined company's board will have thirteen directors, with eight representatives from PacWest and five representatives from CapitalSource.

"PacWest fills the need of CapitalSource for a more stable and low cost deposit base. CapitalSource will give PacWest a more robust and diverse lending presence. Both institutions share a conservative credit culture and have talented and dedicated employees that will make the combined company much more than the sum of its parts going forward," CapitalSource CEO James Pieczynski stated.

The companies noted that Wagner will be CEO of the combined company and of Pacific Western Bank, with Pieczynski being the president of the new CapitalSource division of Pacific Western Bank. John Eggemeyer, Chairman of PacWest Bancorp, will become chairman of the combined company.

In late May, Los Angeles, California-based PacWest Bancorp completed its acquisition of First California Financial Group, Inc. (FCAL) at $8 per share in an all-stock deal of $231 million, with First California Bank, a subsidiary of First California, merging with and into PacWest's banking subsidiary, Pacific Western Bank. The acquisition was first announced in November 2012.

PACW closed Monday's regular trading session at $32.48, up $0.16 or 0.50% on a volume of 0.27 million shares. CSE closed at $9.83, up $0.14 or 1.44% on a volume of 2.22 million shares, and it surged a further $1.00 or 10.17% in after-hours trading.