PacWest Bancorp to buy CapitalSource for $2.29 bn

BancorpUS bank holding company PacWest Bancorp yesterday agreed to buy commercial bank CapitalSource Inc in a $2.29 billion cash and stock deal in order to expand in southern California.

Under the terms of the deal, CapitalSource shareholders will receive $2.47 in cash and 0.2837 shares of PacWest common stock for each share of CapitalSource common stock. The total value of the deal based on the closing price of PacWest shares on 19 July of $32.32, is $11.64.

PacWest shareholders will own approximately 45 per cent of the combined company, while CapitalSource shareholders are expected to own approximately 55 per cent.

The merger would become the 6th largest publicly-owned bank headquartered in California, and the 8th largest commercial bank headquartered in California and would have around $15.4 billion in assets with 96 branches throughout the state.

The merged company will be called PacWest Bancorp and the combined subsidiary bank will be called Pacific Western Bank. The CapitalSource national lending operation will continue to do business under the name CapitalSource as a division of Pacific Western Bank.

Based in Los Angeles, CapitalSource is the parent of CapitalSource Bank, a California Industrial Bank with approximately $8.7 billion in assets and 21 branches located in southern and central California.

CapitalSource Bank will be merged into Pacific Western Bank, the Los Angeles-based wholly-owned subsidiary of PacWest Bancorp. Pacific Western Bank had $6.7 billion in assets and 75 branches across 10 California counties.

Post closing, the combined company board will have thirteen directors, eight from PacWest and five from CapitalSource.

Matt Wagner, CEO of PacWest Bancorp, said, "CapitalSource has built an enviable lending platform and growth engine. PacWest has a valuable community banking franchise and a low cost deposit base driven by our high percentage of noninterest bearing demand deposits. The combination of these two franchises will create a formidable company going forward, with a strong balance sheet and capital base, attractive margins and good earnings momentum."

"The combination of CapitalSource and PacWest will produce tremendous benefits for the shareholders of both companies, said James Pieczynski, CEO of CapitalSource.