This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Investors Love PacWest Deal for Capital Source (Update 1)

Updated from 1:57 p.m. ET with later market information and comments from an interview with FIG Partners analyst Christopher Marinac.

NEW YORK ( TheStreet) -- Investors are applauding the merger of PacWest Bancorp (PACW - Get Report) and CapitalSource (CSE).

The two Los Angeles banks late on Monday announced a deal under which shareholders of Capital Source will receive $2.47 in cash and 0.2837 PacWest shares for each CapitalSource share they hold. Based on PacWest's closing share price of $32.32 on Friday, the deal values CapitalSource at $11.64 a share. The transaction is valued at $2.3 billion, making it the largest bank merger deal so far this year.

It was no surprise to see CapitalSource's shares on Tuesday rise from their closing price of $9.83 on Monday at least to the value of the offering, but the shares were actually 21.5% late Tuesday afternoon to $11.94.

PacWest's shares were also up Tuesday afternoon, by 7% to $34.75.

PacWest is the smaller of the companies, with $6.7 billion in total assets for its main subsidiary Pacific Western Bank. CapitalSource's main subsidiary CapitalSource Bank has about $8.7 billion in total assets.

But even though PacWest will only hold 45% of the combined company's shares, it will appoint eight members to the combined company's 13-member board of directors, with CapitalSource appointing five members.

PacWest CEO Matt Wagner will be CEO of the combined company, while CapitalSource CEO James Pieczynski will continue to run "all current CapitalSource lending operations."

PacWest's chairman John Eggemeyer will stay on as chairman of the combined company.

Jefferies LLC acted as PacWest's adviser for the transaction, while JPMorgan Chase was the adviser for CapitalSource.

While having a smaller balance sheet, PacWest has the larger retail network, with 75 branches, while CapitalSource only has 21 branches.

PacWest has successfully completed several banking deals over recent years, most recently completing its acquisition of First California Financial Group of Westlake Village, Calif., with $2 billion in assets and 15 branches.

The merger of PacWest and CapitalSource is subject to votes by both company's shareholders. As of March 31, mutual funds managed by Fidelity Investments held 9.8% of PacWest's shares and 10.4% of CapitalSource's shares. The deal is expected to be completed during the first quarter of 2014.

Retaining Pieczynski to manage his CapitalSource's lending team after the merger is completed, could go a long way in retaining lending staff and building upon CapitalSource's national business lending platform.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
CSE $15.50 -0.51%
GS $191.27 -0.27%
MS $35.82 -1.16%
PACW $44.46 -1.18%
AAPL $129.36 0.21%

Markets

DOW 18,203.37 -85.26 -0.47%
S&P 500 2,107.78 -9.61 -0.45%
NASDAQ 4,979.9010 -28.1950 -0.56%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs