CIBC Sweetens PrivateBancorp Bid by 20% to $4.9 Billion

Updated on
  • Revised terms follow June offer considered insufficient
  • Cash-and-stock deal expected to close in second quarter

The Canadian Imperial Bank of Commerce in Toronto.

Photographer: Reynard Li/Bloomberg

Canadian Imperial Bank of Commerce increased its offer for PrivateBancorp Inc. by 20 percent to about $4.9 billion as it seeks to expand operations in the U.S.

CIBC had offered to buy Chicago-based PrivateBancorp in June, but the U.S. firm delayed a Dec. 8 shareholder vote after its share price climbed along with other U.S. financial companies following Donald Trump’s election. Some investors and proxy advisory firms had called the bid inadequate.

Under the new terms, CIBC will pay $24.20 in cash and 0.4176 a share of its own stock for each PrivateBancorp share, the companies said Thursday in a statement. The deal is expected to be completed in the second quarter, and has the unanimous support of both boards, the firms said. PrivateBancorp shareholders may vote on the offer as early as mid-May.

“The quality of its management team and its focus on building a client-first culture make PrivateBancorp an excellent fit," CIBC Chief Executive Officer Victor Dodig said in the statement. The firms still believe a merger “is a compelling opportunity that offers immediate and long-term value for PrivateBancorp stockholders.”

CIBC fell 2.4 percent to C$114.76 at 11:16 a.m. in Toronto, the worst performance in the eight-company S&P/TSX Commercial Banks Index. PrivateBancorp rose 5.8 percent to $59.48.

Close Call

At least one analyst said the sweetened offer may still fall short.

“I don’t think it’s enough," said Christopher McGratty, a Keefe Bruyette & Woods analyst. PrivateBancorp is probably worth $63 a share on its own, and the new bid only valued it at about $61 before the market opened Thursday.

“You’re not even getting to what I think is fair value let alone a control premium," McGratty said in a phone interview. “It’s going to be close."

CIBC, Canada’s fifth-largest lender by assets, is pursuing the takeover to expand its commercial and private banking business in the U.S. and leverage its wealth-management platform in the country. PrivateBancorp, with about $20 billion in assets, serves mostly middle-market companies, business owners and wealthy families.

Unhappy Investors

John Aiken, a Toronto-based analyst with Barclays Plc, was more optimistic than McGratty about the deal, but said CIBC’s investors may not be happy with the added costs.

“What we believe investors will likely have issue with is not just the higher cost of PrivateBancorp, but the implied higher price tags associated with follow-on acquisitions, as we anticipate CIBC’s journey into the U.S. banking market will finally begin,” he said in a note to clients.

The Canadian bank initially had offered $18.80 in cash and 0.3657 of a common share in exchange for each PrivateBancorp share, valuing the U.S. firm at about $3.8 billion as of June 29. PrivateBancorp’s stock had increased about 28 percent before the revised terms were announced.

“The PrivateBancorp team remains enthusiastic about joining the CIBC family,” PrivateBancorp President Larry Richman said in the statement. “We look forward to closing the transaction as expeditiously as possible."

CIBC will pay about $1.9 billion in cash and issue about 33.5 million CIBC common shares to PrivateBancorp investors for the acquisition, according to the statement.

— With assistance by Doug Alexander

(Updates with analyst’s comment starting in 10th paragraph.)
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