Walnut Creek, Calif.-based Mechanics Bank agreed to acquire Roseville, Calif.-based Rabobank NA in a deal with total consideration of about $2.1 billion.
Mechanics Bank will acquire Rabobank's retail, business banking, commercial real estate, mortgage and wealth management businesses. It will not, however, acquire its food and agribusiness assets, which will be transferred with limited exceptions to a Rabobank affiliate, the Missouri-based commercial lender RABO AgriFinance Inc.
In a separate release, Rabobank wrote that the deal would strengthen RABO AgriFinance's position as the leading production ag lender in the U.S. The American food and agriculture sector is the most important growth area for the bank globally, it wrote. The ag lender plans to open 10 new offices in California and currently operates more than 40 nationwide. About 170 staff at Rabobank NA will become employees of RABO AgriFinance.
The deal is expected to close in the third quarter.
On an aggregate basis, S&P Global Market Intelligence calculates that the deal value is 129.2% of common equity and 156.9% of tangible common equity, 15.14% of assets and 14.5x earnings.
S&P Global Market Intelligence valuations for bank and thrift targets in the West region between March 15, 2018 and March 15, 2019 averaged 178.54% of book, 181.57% of tangible book and had a median of 27.29x last-12-months earnings, on an aggregate basis.
Upon closing, Netherlands-based Rabobank, the parent company of Rabobank NA, will receive 9.9% of Mechanics Bank's outstanding shares. Currently, 79% of Mechanics Bank's outstanding shares are owned by Ford Financial Fund II LP, an affiliate of the private equity firm Ford Financial Fund.
Mechanics Bank will expand in California by 101 branches to be ranked No. 14 with a 1.06% share of approximately $1.40 trillion in total market deposits.
The combined company will have more than $17 billion in assets and will operate as Mechanics Bank. It will have 144 branches.
Lazard Freres & Co. LLC served as financial adviser to Rabobank NA, while Sullivan & Cromwell LLP served as legal adviser. For Mechanics Bank, Wachtell Lipton Rosen & Katz served as legal adviser, while Credit Suisse Securities (USA) LLC served as financial adviser.
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