UnionBanCal Could See Higher Bid: Analysts

"The proposed price does not reflect the strength of UnionBanCal's strong capital position, the superior credit quality of its assets, and its potential for profitable asset and core deposit growth in the current market environment," Richard Farman, UnionBanCal's lead director and head of the special committee reviewing the offer, said in a release Wednesday.

The company added that the proposed offer was made at a time of "negative sentiment and uncertain outlook" in the banking sector and that "any valuation of UnionBanCal should not be inappropriately impacted by these negative factors."

"We agree with [UnionBanCal's] perspective that it does not make sense to sell at a point of weakness for the industry if they are a long-term survivor and bank multiples eventually revert to the median, but [Mitsubishi UFJ's] majority ownership stake takes this out of [UnionBanCal's] hands to some degree," Brent Christ, an analyst at Fox-Pitt, Kelton Cochran Caronia Waller, writes in a note. The $63 a share offer represents 1.8 times book value, 2 times tangible book value and 13.9% core deposit premium, he estimates.

"I think it should be a little bit more," Christ says in an interview.

UnionBanCal "certainly has, relative to a lot of the other California banks, weathered the storm. I think that [the Bank of Tokyo] sees that and sees where the valuations are [at other banks] and wants to expand their presence in the U.S. a bit. This would be a good platform to do that," Christ says.

He estimates that a $70 a share offer represents two times book value, 2.1 times tangible book value and 17% core deposit premium -- more appropriate measures given the bank's strong core deposit base, positive earnings momentum and favorable risk profile, he says.