trending Market Intelligence /marketintelligence/en/news-insights/trending/sd9QloTC3b_NjV6lfgfDSA2 content esgSubNav
In This List

Cathay General to acquire SinoPac Bancorp for $340M


Banking Essentials Newsletter: January 11th Edition


Banking Essentials Newsletter December 21st Edition


The Road to Basel IV: Navigating the challenge facing European banks


Basel Framework- Utilizing data to analyze the capital position of European banks.

Cathay General to acquire SinoPac Bancorp for $340M

Los Angeles-based CathayGeneral Bancorp ($13.26 billion) agreed to Los Angeles-basedSinoPac Bancorp, aunit of Taipei, Taiwan-based BankSinoPac Co. Ltd., for $340 million in a 90%-cash-and-10%-stocktransaction.

The deal consideration may be adjusted based on the net gainfrom the sale of certain real estate owned by Far East National Bank, a unit of SinoPac Bancorp.Cathay General plans to retain $100 million of the purchase price and releaseit after the merger of Far East National and Cathay Bank, and plans to pay 10% of the purchase priceover a period of three years.

Cathay General has the option to pay 10% of theconsideration through its common shares. The exchange ratio will be based onthe volume weighted average closing price of Cathay General's common stock forthe 20 trading days ending on the third business day immediately before dealcompletion.

Far East National operates a total of nine branches,including five in Los Angeles, one in Orange County, two in San Francisco, andone in Silicon Valley. On a consolidated basis, SinoPac Bancorp reported $1.3billion in total assets, $956 million in total loans, and $964 million in totaldeposits, as of March 31.

Cathay General expects the deal to result in cost savingsequal to 60% of Far East National's noninterest expense base and approximately$10 million pretax one-time expenses. Other deal assumptions included a creditmark of approximately $2.5 million and core deposit intangible equal to 2% ofnon-time deposits.

The transaction is not expected to result in any additionalgoodwill and will be neutral to tangible book value per share. In addition, itis estimated to be approximately 4% to 5% accretive to Cathay General's GAAPEPS, excluding one-time transaction costs and restructuring charges. The dealhas an estimated internal rate of return of greater than 20%.

The deal value, according to SNL data, is 115.3% of bookvalue, 126.4% of tangible book value, and 46.5x last-12-months earnings, on anaggregate basis. The deal price is 35.26% of deposits and 26.17% of assets,while the tangible book premium-to-core deposits ratio is 12.07%.

For comparison, SNL valuations for bank and thrift targetsin the West region between July 8, 2015, and July 8, 2016, averaged 142.45% ofbook, 144.14% of tangible book and had a median of 26.07x LTM earnings, on anaggregate basis.

The transaction, subject to regulatory approvals, isexpected to close during the first half of 2017.

RBC Capital Markets served as financial adviser to Cathay,and Wachtell Lipton Rosen & Katz served as legal counsel. Morgan Stanleyserved as financial adviser to Bank SinoPac, and Lee and Li Attorneys-at-Lawand Davis Polk & Wardwell LLP served as legal counsel.

Taipei, Taiwan-based SinoPac Financial Holdings Co. Ltd. is the ultimateparent of SinoPac Bancorp.

Cathay General Bancorp will expand in Los Angeles County,Calif., by five branches to be ranked No. 12 with a 1.65% share of about $400billion in total market deposits; in Santa Clara County, Calif., by one branchto be ranked No. 16 with a 0.66% share of about $114.16 billion in total marketdeposits; in Alameda County, Calif., by one branch to be ranked No. 15 with a0.82% share of approximately $39.44 billion in total market deposits; in SanFrancisco County, Calif., by one branch to be ranked No. 26 with a 0.08% shareof approximately $193.60 billion in total market deposits; in Orange County,Calif., by one branch to be ranked No. 17 with a 0.97% share of approximately$99.39 billion of total market deposits.

To use branchanalytics tools to compare market overlap, click here.To create custom maps, click here.