July 23 (Bloomberg) -- PacWest Bancorp agreed to purchase CapitalSource Inc. in a deal valued at about $2.3 billion to create the eighth-largest commercial bank based in California. Shares of both companies surged.
CapitalSource investors will get about $11.64 in PacWest stock and cash, 18 percent more than yesterday’s closing price, the Los Angeles-based companies said in a statement. Each CapitalSource share will be exchanged for 0.2837 PacWest share and $2.47 in cash, according to the statement.
The combined bank would have about $15.4 billion in assets, with 96 branches in California, the most populous U.S. state, according to yesterday’s statement. PacWest Chief Executive Officer Matt Wagner will lead the combined firm and James Pieczynski, CEO of the target company, will run the CapitalSource unit.
“CapitalSource will give PacWest a more robust and diverse lending presence,” Pieczynski said in the statement.
PacWest climbed 7.1 percent to close at $34.77 in New York trading, the most since October 2011. CapitalSource gained 22 percent to $11.97.
The deal, expected to be completed in the first quarter of 2014, will boost PacWest’s presence in middle-market lending, the companies said in a presentation. The banks estimate the transaction will add 18 percent to earnings per share in 2015.
The transaction creates “excellent” merger-and-acquisition prospects for PacWest, and the bank probably will make more deals, Wagner said today on a conference call. The CapitalSource purchase would be PacWest’s biggest, according to data compiled by Bloomberg. The lender most recently acquired First California Financial Group Inc. in June for $196.3 million.
PacWest and CapitalSource have an overlap of about 15 branches, and some locations will be closed, PacWest Chief Financial Officer Vic Santoro said on the call.
JPMorgan Chase & Co. provided financial advice to CapitalSource. Jefferies Group LLC, Goldman Sachs Group Inc. and Castle Creek Financial LLC advised PacWest. Wachtell Lipton Rosen & Katz were legal counsel for CapitalSource, and Sullivan & Cromwell LLP for PacWest.
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