A private-equity cash infusion is part of the merger between PacWest and Banc of California. One analyst expects a wave of deals for smaller banks.
Banc of California Inc.’s proposed agreement to acquire PacWest Bancorp. helped send regional-bank stocks considerably higher on Wednesday. But even after a two-day increase of 12% for its shares, the acquiring bank remains the favorite name among analysts covering regional players in the U.S.
The merger agreement was announced after the market close on Tuesday, but the rumor mill had already sent Banc of California’s BANC stock up by 11% that day. Then on Wednesday, shares of PacWest Bancorp PACW shot up 27% to $9.76, which was above the estimated takeout value of $9.60 a share when the deal was announced. The merger deal, if approved by both banks’ shareholders, will also include a $400 million investment from Warburg Pincus LLC and Centerbridge Partners L.P.
More broadly, Odeon Capital analyst Dick Bove wrote to clients on Wednesday that the merger deal, along with increasing involvement of private-equity firms in lending businesses, the expected enhancement of regulatory capital requirements for banks and other factors could lead to more consolidation among smaller banks.
The SPDR S&P Regional Banking exchange-traded fund KRE rose 5% on Wednesday but was still down 17% for 2023, while the SPDR S&P 500 ETF Trust SPY was up 19%, both excluding dividends.
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