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PacWest Bancorp, Square 1 Financial Agree to Merge

March 02, 2015, 08:06 AM
Filed Under: Mergers & Acquisitions

PacWest Bancorp and Square 1 Financial, Inc. today announced the signing of a definitive agreement and plan of merger (the "Agreement") whereby PacWest will acquire Square 1 in a transaction valued at approximately $849 million. The Square 1 lending operations will continue to do business under the name Square 1 as a division of Pacific Western Bank.

Square 1 Financial, Inc., headquartered in Durham, North Carolina, is the parent of Square 1 Bank, a North Carolina commercial bank with approximately $3.1 billion in assets at December 31, 2014, one banking office in Durham, and twelve loan production offices throughout the United States. In connection with the transaction, Square 1 Bank will be merged into Pacific Western Bank, the Los Angeles-based, wholly-owned subsidiary of PacWest Bancorp. PacWest had $16.2 billion in assets at December 31, 2014 and 80 branches located primarily in southern and central California. The combined company will remain headquartered in Los Angeles and will have senior executives from each of the organizations in key positions. Upon completion of the transaction, one former Square 1 director will be appointed to the PacWest board.

The transaction, currently expected to close in the fourth quarter of 2015, is subject to customary conditions, including the approval of bank regulatory authorities and the Square 1 stockholders. Certain stockholders of Square 1 have agreed to vote in favor of the transaction.

As of December 31, 2014, on a pro forma consolidated basis, the combined company would have had approximately $19.8 billion in assets with 80 branches throughout California and one in North Carolina. The combined institution would be the 6th largest publicly owned bank headquartered in California.

Under the terms of the Agreement, Square 1 stockholders will receive 0.5997 shares of PacWest common stock for each share of Square 1 common stock. The total value of the per share merger consideration, based on the closing price of PacWest common stock on February 27, 2015, of $45.84 is $27.49.

The transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes and Square 1 stockholders are not expected to recognize gain or loss to the extent of the stock consideration received.

Matt Wagner, CEO of PacWest Bancorp, commented, "We are very excited to align ourselves with the Square 1 team. Thanks to the talented professionals and founders that built this successful institution, we are confident this transaction with Square 1 represents an excellent opportunity to grow core deposits, expand our nationwide lending platform, and increase our presence in the dynamic technology and life-sciences markets."

"Joining PacWest will be a terrific opportunity for our clients, employees, and stockholders," said Doug Bowers, CEO of Square 1. "Square 1 offers PacWest a complementary line of business and significant core deposit growth. As part of PacWest, we will maintain our steadfast commitment to the entrepreneurial and venture communities, will be able to offer clients a wider array of products and will be well-positioned to continue to serve them through all stages of their growth."

In connection with the announcement of the transaction, an investor presentation will be filed with the SEC and is available on the websites of both PacWest Bancorp and Square 1. On the PacWest Bancorp website, the presentation can be found under the link for "Presentations". On the Square 1 website, the presentation can be found under the link for "Events & Presentations".

Sandler O'Neill acted as financial advisor to Square 1 in the transaction and delivered a fairness opinion to the Board of Directors of Square 1. Wachtell, Lipton, Rosen & Katz served as legal counsel to Square 1. Jefferies LLC acted as financial advisor to PacWest. Sullivan & Cromwell LLP served as legal counsel to PacWest.

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