Private Equity Enters the Bank Consolidation Game with Investment in PacWest and Banc of California

This commentary discusses the merging of Banc of California (BANC) and PacWest Bancorp (PACW) to create a new bank in California.

Key highlights include:
• Banc of California (BANC) and PacWest Bancorp (PACW) (both unrated by DBRS Morningstar) will merge in an all-stock deal to create a California-focused business bank with $36 billion in assets.
• To help fund the combination and reposition the balance sheet, the banks have also agreed to sell $400 million of new common shares to private equity firms Warburg Pincus and Centerbridge Partners, representing about a 19% ownership stake.
• We view the resolution of PACW without the need for FDIC assistance and with an infusion of private capital as a positive for the banking sector as a whole and should help reinforce the stabilization of the sector that was already underway.

“We expect that the current more challenging earnings environment and expected changes to regulatory requirements will drive more consolidation in the banking sector.,” said John Mackerey, Senior Vice President - North American Financial Institution.