Umpqua Holdings Corp., Oregon’s biggest bank, agreed to pay about $2 billion in stock and cash to buy Sterling Financial Corp., the lender backed by Warburg Pincus LLC and Thomas H. Lee Partners LP.
Sterling holders will receive 1.671 shares of Umpqua stock and $2.18 in cash for each of their shares, the companies said yesterday in a statement. That values Spokane, Washington-based Sterling at $30.52 a share, 26 percent more than its $24.20 close on Aug. 30, when Bloomberg reported Sterling was for sale.
“With our size, shared cultures and financial strength, our combined organization will be uniquely positioned to deliver value,” Umpqua Chief Executive Officer Raymond P. Davis, who will lead the combined company, said in the statement.
Buying Sterling would double Umpqua’s size to about $22 billion in assets and almost 400 branches. Warburg Pincus and Thomas H. Lee, the private-equity firms, each held more than 20 percent of Sterling’s common stock at midyear.
Sterling advanced 7 percent to $28.40 at 9:47 a.m. in New York. Umpqua slid 4.3 percent to $16.23. Both boards approved the deal, which will be completed in the first half of next year, the banks said.
Davis has sought to bulk up Umpqua over the past two years through mergers and acquisitions. The lender bought Financial Pacific Holding Corp. in July, and last year added Circle Bancorp, a six-branch lender in Novato, California.
Sterling took $303 million from the U.S. Treasury Department’s Troubled Asset Relief Program, repaid a year ago through a public stock offering. The bank, run by CEO Greg Seibly, had $9.9 billion in assets as of midyear, with deposits of $6.6 billion from about 170 branches in Washington, Oregon, Idaho and California.
JPMorgan Chase & Co. provided financial advice to Umpqua, and Wachtell Lipton Rosen & Katz was the legal adviser. Sterling used Sandler O’Neill & Partners LP as financial adviser and Davis Polk & Wardwell LLP for legal advice.