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PacWest undaunted by stock rally in pursuit of CU Bancorp


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PacWest undaunted by stock rally in pursuit of CU Bancorp

CU Bancorp, at its November 2016 strategic planning retreat, listened to a Keefe Bruyette & Woods presentation on potential merger partners and soon after authorized the firm to contact those parties on its behalf.

But with bank stocks benefiting for months from a postelection rally, Los Angeles-based CU was deemed by most to be too expensive. There was one California bank, however — Beverly Hills-based PacWest Bancorp — that signaled interest even in a deal that would reflect CU's Feb. 21, 2017, stock price of $39.55. On March 7, PacWest's nonbinding letter of intent proposed to exchange each CU common share for 0.7101 PacWest common share and to appoint CU Chairman and CEO David Rainer to the acquirer's board. At the time, the offer would have valued CU at $40.00 per share. Sandler O'Neill & Partners, according to a regulatory filing, had informed CU that PacWest would pay no more than that amount — in contrast to the minimum of $42.00 per share that CU expected.

KBW advised CU that a comparable offer was unlikely and that PacWest might withdraw from discussions if CU attempted to negotiate. CU formally engaged KBW's services March 15; PacWest officially hired Sandler on March 28.

Terms negotiated included the repurchase of CU's series A preferred stock from the U.S. Treasury Department. And on April 3, Sandler proposed an alternative pricing structure, wherein the deal would be 70% stock and 30% cash, with a fixed exchange ratio of 0.5308, plus $12.00 in cash per share. The deal's implied per-share value at the time would have still been $40.00.

On April 4 and 5, PacWest sent agreements for postmerger consulting services to CU's Rainer, President K. Brian Horton and CFO Karen Schoenbaum.

Finally, on April 5, PacWest's and CU's boards both voted in favor of the merger agreement, which by then valued CU at $705 million, or $39.45 per share. The deal was made public the following day.

PacWest has since registered 9,497,707 common shares for issuance under the transaction.