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PacWest Bancorp’s Acquisition by Banc of California: A Milestone Turnaround

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PacWest Bancorp’s stock surged following the announcement of its all-stock acquisition by Banc of California Inc. The deal is receiving positive feedback from analysts, marking a significant milestone in PacWest’s turnaround.

PacWest Bancorp (PACW) and Banc of California (BANC) have joined forces, bringing PacWest’s ongoing turnaround plan to a successful conclusion, according to KBW analyst Christopher McGratty.

In premarket trading, PacWest’s stock jumped by 30% to $10 per share, recovering all the losses experienced on Tuesday when news of the acquisition first broke. The official announcement of the merger came after the market closed on Tuesday.

During Paul Taylor’s appointment as CEO of PacWest in early 2023, market expectations were high for a potential sale or strategic move. However, the banking sector faced setbacks in March with the collapse of Silicon Valley Bank, Signature Bank, and First Republic Bank.

McGratty noted that given the circumstances, this acquisition is considered a win for PacWest shareholders, particularly when compared to the fate of shareholders from Silicon Valley Bank, First Republic, and Signature Bank who were left with nothing. However, it falls short of the initial expectations set at the beginning of the year for PacWest’s terminal value.

A Positive Outlook for PacWest Bank amid Speculation

Speculation surrounding the potential collapse of PacWest Bank has caused its stock to take a significant hit in value this year, losing about two-thirds of its worth. However, recent developments and the implied takeout price of PacWest based on stock-for-stock deal terms have provided a glimmer of hope for the banking sector.

According to McGratty, an analyst at an undisclosed firm, the takeout price for PacWest is estimated to be around $9.60 per share. This figure is higher than what many had initially anticipated and is considered a positive outcome for the banking industry as a whole.

Analyst David Chiaverini from Wedbush also chimes in with his opinion, stating that while the deal is fair, it doesn’t particularly stand out as exceptional. He maintains a neutral rating on PacWest but acknowledges that it is likely the deal will be approved. However, he notes that dissent among some shareholders could potentially open the door to a rival third-party bid.

Gary Tenner, an analyst from D.A. Davidson, takes a more optimistic stance on the situation. He emphasizes that the deal is financially attractive and will bring benefits to shareholders of both PacWest and Banc of California. Tenner even goes as far as raising his price target for Banc of California and boosting profit projections for the bank in 2024.

Despite the initial concerns surrounding PacWest Bank’s future, these recent developments suggest a potentially more positive outlook for the institution. The implied takeout price and favorable opinions from analysts indicate a market sentiment that could work in favor of both PacWest and Banc of California.

Also read: PacWest lifts bank stocks as it raises more cash from loan sale

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