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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

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) 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

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!
DOW 17,113.54 +61.81 0.36%
S&P 500 1,983.53 +9.90 0.50%
NASDAQ 4,456.0160 +31.3120 0.71%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

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