Sterling Surges as Washington Bank Seeks Takeover Bidders

Sterling Financial Corp., the Washington state lender backed by Warburg Pincus LLC and Thomas H. Lee Partners LP, rose 13 percent after the bank held talks with potential suitors.

The bank climbed 9.2 percent to $26.42 at 5:20 p.m. in New York, making it the sixth-best performer in the Russell 2000 Index. Sterling has sought takeover bids in recent weeks and held talks with at least two bidders, people with direct knowledge of the matter said last week.

Sterling had a market value of about $1.5 billion before today, which would rank among the biggest of the more than 100 bank takeover deals announced this year, according to data compiled by Bloomberg. Suitors for U.S. lenders have been discouraged by new costs imposed under the 2010 Dodd-Frank Act, and by the fate of M&T Bank Corp.’s year-old bid for Hudson City Bancorp, which was delayed by added scrutiny from regulators.

Warburg Pincus and Thomas H. Lee Partners each held more than 20 percent of the Spokane-based bank’s common stock as of Jan. 31, according to the company. Sterling Chief Financial Officer Patrick J. Rusnak declined to comment last week on potential bids.

U.S. bank takeovers announced this year total $7.93 billion, according to data compiled by Bloomberg. The largest was PacWest Bancorp’s $2.2 billion bid last month for CapitalSource Inc. The Hudson City takeover, which is still pending, was valued at about $3.7 billion when announced on Aug. 27, 2012.

Capital Support

Sterling sold stakes in 2010 to New York-based Warburg and Boston’s Thomas H. Lee as three straight annual losses eroded capital. It also took $303 million from the U.S. bank bailout fund, which was repaid a year ago through a public stock offering.

The firm was profitable for the past two fiscal years and the shares had advanced about 16 percent in 2013 through last week. Assets stood at $9.9 billion as of midyear with deposits of $6.6 billion from 175 branches in Washington, Oregon, Idaho and California. It’s run by Greg Seibly, the president and chief executive officer, who joined in late 2009.

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