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PacWest Bancorp recently announced an agreement to purchase Square 1 Financial, Inc., a lender that focuses primarily on the technology industry. Pursuant to this deal, Square 1 bank, owned by Square 1 Financial, will merge into Pacific Western Bank, a Los Angeles subsidiary of PacWest Bancorp.
Greater liquidity
The transaction, expected to close in the fourth quarter of 2015, should provide the combined entity with far greater liquidity, according to American Banker. While PacWest had a 101 percent loan-to-deposit ratio on Dec. 31, 2014, the LTD of the combined entity will be 91 percent.
In addition, the new organization would have 80 branches all over California and one in North Carolina, as well as $19.8 billion in assets, considering the locations and assets that both PacWest Bancorp and Square 1 Financial held at the end of last year. After the merger, the resulting entity will be the sixth-largest publicly-traded bank based in California.
Acquisition
The transaction will involve a stock consideration, whereby Square 1 shareholders will receive 0.5997 units of PacWest common stock for each Square 1 share they own. As a result, the deal will be worth roughly $849 million.
The deal's success hinges on securing the approval of both Square 1 stockholders and banking regulators, but some of the aforementioned shareholders have already consented to voting in favor of the merger.
Great expectations
The CEOs of both companies involved in the acquisition have praised the deal, emphasizing the benefits that will result.
"We are very excited to align ourselves with the Square 1 team," Matt Wagner, CEO of PacWest Bancorp, said in a statement. "Thanks to the talented professionals and founders that built this successful institution, we are confident this transaction with Square 1 represents an excellent opportunity to grow core deposits, expand our nationwide lending platform, and increase our presence in the dynamic technology and life-sciences markets."
Doug Bowers, CEO of Square 1, also chimed in, mentioning that the deal presents significant opportunity for his employees, clients and investors.
Growing trend
While many expect the merger between PacWest and Square 1 to produce great results, it could simply be evidence of things to come. A wide range of traditional banks might benefit from merging with more tech-focused lenders, as doing so could help the two combine their respective strengths. At the same time, many financial institutions are becoming more open to embracing technology.
Garnet Capital Advisors 500
Mamaroneck Avenue, Harrison, NY 10528
(914) 909-1000
info@garnetcapital.comGarnet Capital Advisors 500
Mamaroneck Avenue, Harrison,
NY 10528
(914) 909-1000
