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Pacific Premier to buy Heritage Oaks for $405.6M


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Pacific Premier to buy Heritage Oaks for $405.6M

In California, Pacific Premier Bancorp Inc. is acquiring Heritage Oaks Bancorp, under an all-stock deal valued at $11.68 per share, or approximately $405.6 million, based on the buyer's Dec. 12 closing price of $33.65.

The deal's terms will see each Heritage Oaks common share exchanged for 0.3471 Pacific Premier common shares, an arrangement that gives Heritage Oaks shareholders a 30.1% stake in the resulting entity.

Termination of the merger under certain circumstances will require Heritage Oaks to pay Pacific Premier a fee of $15.0 million, according to a Form 8-K.

Should stockholders and regulators approve the merger, the transaction is expected to close early in the second quarter of 2017 and be immediately accretive to tangible book value per share and 5.2% accretive to 2018's EPS. The EPS accretion estimates are based on projected cost savings of about 26.5% of Heritage Oaks' noninterest expense, 60% phased-in during 2017 and fully phased-in during 2018. Revenue synergies are not included in the calculations.

The deal value, according to SNL data, is 185.8% of book, 214.1% of tangible book and 25.4x last-12-months earnings, on a per-share basis. The price represents 24.77% of deposits and 20.33% of assets. The tangible book premium-to-core deposits ratio is 14.88%.

The one-day premium on the deal is 7.55%, based on Heritage Oaks' closing price of $10.86 on Dec. 12. The one-month premium is 31.83%, based on the target's closing price of $8.86 on Nov. 14.

SNL valuations for bank and thrift targets in the West region between Dec. 13, 2015, and Dec. 13, 2016, averaged 141.21% of book, 147.69% of tangible book and had a median of 27.26x LTM earnings, on a per-share basis.

Irvine-based Pacific Premier in January closed another acquisition, that of Riverside-based Security California Bancorp. Subsidiary Pacific Premier Bank had $3.75 billion in assets at the end of September.

Paso Robles-based Heritage Oaks' subsidiary, Heritage Oaks Bank, had assets of $1.99 billion as of Sept. 30. In November, a consent order requiring it to improve its Bank Secrecy Act and anti-money laundering program was lifted by the FDIC and the California Department of Business Oversight. Heritage Oaks is owned in part by Carpenter Community Bancfund-A LP, Carpenter Community Bancfund LP and Carpenter Community Bancfund-CA LP.

Also under the agreement, three of Heritage Oaks' directors will be added to Pacific Premier's board. They are President and CEO Simone Lagomarsino, Chairman Michael Morris and Vice Chairman Michael Pfau. Relationship bankers and key executives will be retained, including Rob Osterbauer and Brooks Wise.

Serving as Pacific Premier's financial and legal advisers in the transaction are D.A. Davidson & Co. and Holland & Knight LLP. D.A. Davidson also submitted a fairness opinion. For Heritage Oaks, Sandler O'Neill & Partners LP served as financial adviser and submitted the fairness opinion. Manatt Phelps & Phillips LLP served as legal counsel.

Pacific Premier will enter San Luis Obispo County, Calif., with nine branches to be ranked second with a 18.51% share of approximately $6.11 billion in total market deposits; and it will enter Santa Barbara County, Calif., with three branches to be ranked seventh with a 4.07% share of about $11.94 billion in total market deposits.

To use SNL's branch analytics tools to compare market overlap, click here. To use SNL Maps to create custom maps, click here.

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