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Columbia Banking System has agreed to buy West Coast Bancorp. The acquisition, valued at about $506 million, will create a community bank in the Pacific Northwest with more than $7 billion in assets.
September 26 -
West Coast Bancorp of Lake Oswego, Ore., one of many struggling institutions in the Pacific Northwest, said Monday it managed to raise all the capital it needed to satisfy regulators — and then some.
October 26 -
West Coast Bancorp Inc. in Lake Oswego, Ore., has added a director to its board with ties to a investment firm that participated in the company's 2009 private placement.
December 16 -
First Financial in Cincinnati instituted a full pay-out of earnings in August. Although investors were happy with the move, the company has been swarmed with questions over how long it plans to keep the payout. Last week, the company committed to it until the end of 2013.
April 30
West Coast Bancorp's pending sale could serve as a green light for private equity firms itching to cash out of post-crisis bank investments.
A trio of private equity funds that
Castle Creek Capital Partners, GF Financial and MFP Partners have already pledged their support — and voting shares — in favor of the sale, Robert Sznewajs, West Coast's president and chief executive, said in an interview. Those investors own about 22% of the $2.4 billion-asset company's outstanding shares.
"West Coast was one of the first banks in the country to get recapitalized, and there are going to be a lot more of these," says Brett Rabatin, an analyst at Sterne Agee & Leach. "Private equity is going to be looking for their returns."
Still, banks are trading at fairly low multiples, leading some analysts to wonder when the next big private equity exit could occur. "Valuations ... are still not particularly high, so I'm not sure that this means there is going to be any huge increase in that kind of deal," says Joe Gladue, an analyst at B. Riley & Co.
MFP, a
The deal allows Melanie Dressel, Columbia's president and chief executive (and one of American Banker Magazine's
"We have a well-tested and successful track record for integrating community banks, and we feel very confident that this integration will go smoothly," Dressel said during a conference call to discuss the transaction. "This transaction was meant to happen for many reasons."
Dressel, who was unavailable for additional comment, said during the call that Columbia would
Columbia will pay $506 million in cash and stock for West Coast, designating $264.5 million in cash and about 12.8 million shares of common stock for the deal, which should to close early next year.
The deal's consideration amounts to a premium of about 1.45 times West Coast's tangible book value, says Sara Hasan, an analyst at McAdams Wright Ragen in Seattle. Based on the companies' closing stock prices Tuesday, the deal would be valued at $23.10 a share, or a 14% premium to West Coast's closing price on Tuesday.
The deal still requires approval from the rest of West Coast's shareholders, although having a huge block already backing the transaction should put any concerns to rest.
West Coast had been viewed by some industry observers as a potential acquisition target for Columbia before the 2008 financial crisis, Hasan says. But the Oregon company was hammered by its exposure to nonperforming construction loans, making it a less-appealing takeover target.
West Coast was able to secure the outside funding, which helped it to clean up its balance sheet. Its appeal grew in July, when the Federal Reserve Board
Sznewajs, who will retire once the transaction is completed, declined to say whether West Coast dealt exclusively with Columbia or conducted a bidding process. "The board followed a very disciplined process in dealing with this and made a determination as to the outcome," Sznewajs said in an interview.
West Coast is Columbia's biggest acquisition in recent memory, equaling nearly half of the buyer's asset size at June 30. Columbia plans to cut about a quarter of West Coast's expenses and leverage the seller's strengths in areas such as private banking.
West Coast "has much larger trust department than we do," Dressel said on the conference call. She said that Columbia will also look to use the deal to expand its professional lending program into Oregon.
Dressel indicated that Columbia will put future deals on hold as it integrates West Coast. "Our focus is on that rather than looking for the next deal," she said. "We want to make sure that all of our efforts are focused on how we are going to successfully integrate West Coast."
Despite the deal's size, Hasan says she is comfortable with Dressel's experience with acquisitions, adding that the risks associated with integrating West Coast are less than they might be with a number of other institutions.
Columbia is "a seasoned acquirer, and their [previous] deals have seemed to go quite well," Hasan says. "There is always integration risk, but I would think they are in good shape in that regard."
Matthew Monks and Paul Davis contributed to this article.
