Pacific Capital Bancorp (PCBC)

[Enterprising Investor]

UnionBanCal Corporation to Acquire PCBC (3/12/12)

By David Benoit

The California banking industry is getting slightly more consolidated.

Union Bank, the state’s fourth biggest bank by deposits, as measured by the Federal Deposit Insurance Corp., is buying the parent of the state’s 20th biggest deposit holder, Pacific Capital Bancorp.

California is a fragmented market, one that some of the big banks have plotted expansions into. But Union Bank, owned by Japan’s giant Mitsubishi EFJ Financial Group, is making its own moves to expand. The bank said the acquisition of Pacific Capital, and its Santa Barbara B&T, would give it an increased presence in the central coast area.

Union Bank is biggest in Los Angeles and has significant presence north in San Francisco, while Santa Barbara is concentrated between those two areas, so will fill in a weaker area for Union Bank.

The $1.5 billion deal, at $46 a share for Pacific Capital, is a hefty 60% premium to Friday’s closing price, and one of the bigger deals done in banking recently. It will require permission from banking regulators before closing.

Pacific Capital has $5.9 billion in assets and 47 branches, compared with Union Bank parent UnionBanCal’s nearly $90 billion in assets and 414 branches.

J.P. Morgan Chase, which holds the No. 3 position by deposits in California, last month reiterated its attempt to expand in the state and grab more of the fragmented market. J.P. Morgan however, is not looking for acquisitions, CEO Jamie Dimon has said. Instead the bank is building branches at a rapid clip compared to competitors.

Union Bank had just over 6% of deposits in the state, the FDIC says, while J.P. Morgan has 7.3% and Santa Barbara B&T has 0.53%. Union Bank won’t eclipse J.P. Morgan, but will get much closer. Bank of America and Wells Fargo are No. 1 and No. 2, respectively, at 26% and 19% of deposits, per the FDIC.

Union Bank says the deal’s structure will allow it to adjust the tangible book value of Pacific Capital higher upon closing, which it expects in the fourth quarter. The major benefit that will allow that a change in a deferred tax asset, worth about $248 million, that Union Bank says makes the high premium it is paying worthwhile.

Pacific Capital shares jumped 57% to $45.05 soon after the open Monday.

http://blogs.wsj.com/deals/2012/03/12/union-bank-reels-in-pacific-capital-in-1-5b-california-bank-deal/?mod=yahoo_hs