PacWest Bancorp’s shares experienced a remarkable rise of nearly 30% in premarket trading on Wednesday after news broke of Banc of California’s $1.1 billion acquisition offer.
PacWest stock was trading at $10, above the offer price of $9.60 per share, according to calculations based on Banc of California’s closing price on Tuesday.
The acquisition deal comes as a much-needed boost for PacWest, which had been battling with challenges since the recent banking crisis. The younger Banc of California will pay 0.6569 share for each PacWest share, contributing to its 6% rise as well.
On this merger, market analysts have expressed mixed views.
Raymond James’ David Long believes the sale is favorable for PacWest shareholders. “We believe the sale of PacWest makes sense for shareholders given the numerous struggles the bank has faced since the March banking panic,” Reuters quoted Long as saying.
On the contrary, Wedbush’s David Chiaverini warns of potential dissent from long-term shareholders.
“We question whether or not longer-term PACW shareholders will view this as a strong enough deal price for shareholder approval… We wouldn’t be surprised if there were some dissent among a minority of shareholders and possibly open the door to the potential emergence of a rival third-party bid,” the agency cited Chiaverini’s statement.
The acquisition is expected to accelerate Banc of California’s evolution and profitability profile, marking a significant transformation for the company.
Private equity firms Warburg Pincus and Centerbridge Partners have also pledged to invest $400 million in the buyout deal.
Despite ongoing confusions and uncertainties, the deal’s announcement reflects optimism for the future of both institutions and the banking industry as a whole. The regional banking industry faced its worst turmoil since the 2008 financial crisis earlier this year, with three lenders collapsing—First Republic, Silicon Valley Bank, and Signature Bank of New York—putting PacWest under pressure. However, following the recent challenges, this acquisition has undoubtedly offered hope for a positive turnaround.