Bank of California announced the acquisition of Pacific Mercantile Bank for an all stock consideration of $235 million, or $9.77 per share.
Banc of California (BANC) President and CEO, Jared Wolff said, “Pacific Mercantile is a strong strategic fit for Banc of California. Their size, business focus and deposit profile perfectly align with our existing operations and will accelerate our growth and operating scale in key markets.”
Wolff further added, “Our similar market footprint, corporate cultures and commitment to helping our clients succeed should lead to a smooth and successful transaction and integration. We believe the compelling economics of the transaction will deliver value for both Banc of California and Pacific mercantile shareholders.”
Banc of California estimates about 35% cost savings and sees the transaction to be 12.9% accretive to its bottom line in 2022. It expects total assets to be $9.5 billion upon completion of the transaction which is expected in 3Q.
Furthermore, existing Bank of California investors will own about 81% of the combined entity with the rest being owned by Pacific Mercantile investors. The complementary business models of the two banks present an opportunity to expand relationships in Southern California.
Pacific Mercantile president and CEO, Brad R. Dinsmore said, “Banc of California is a great merger partner for Pacific Mercantile given our shared focus on business and relationship banking.” (See Banc of California stock analysis on TipRanks)
Last month, Janney Montgomery analyst Timothy Coffey upgraded the stock to Buy from Hold with a $22 (12.6% upside potential) target price. Coffey expects “improved earnings power in 2021 and 2022 on better spread income, nominal provision expenses and positive operating leverage.”
Turning to rest of the Street, the stock has a Moderate Buy consensus rating alongside an average analyst price target of $20.33 (4% upside potential) based on 3 Buys and 2 Holds. Shares have surged about 121.3% in the past year.
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