SEC Filing Provides Additional Details on PacWest Sale Process
This afternoon Banc of California and PacWest filed with the SEC the initial draft of their S-4/merger proxy relating to the parties’ planned merger. The broad outlines of how the deal came together have previously been reported, most notably by Bloomberg in story headlined, “A Beach Club Dinner and Jamie Dimon’s Touch: How PacWest Was Rescued,” but the Background of the Merger section in today’s filing provides additional details.
In May and June, PacWest through its financial advisors at Piper Sandler contacted 13 potential acquirers or business combination partners.
Nine of these firms, including Banc of California, agreed to enter into confidentiality agreements and conduct due diligence.
Banc of California was not initially the preferred bidder and from May 5 to June 16 “BANC and PACW did not have further discussions as PACW indicated to BANC that its discussions with other parties were in more advanced stages.”
Instead, PacWest’s attention focused on a potential transaction with the two of the nine parties that had indicated they were willing to consider an all-cash deal. A draft of a potential definitive agreement was shared with these parties.
By the time PacWest’s board met on June 12, however, “PACW management indicated to the PACW board of directors that discussions with these two parties had concluded due to each party’s inability to commit or procure the required capital to support the contemplated all cash acquisition transaction.”
Thus, as of June 12 “PACW was no longer in active discussions with any party regarding a potential strategic transaction.”
On June 16, Banc of California’s CEO got in touch with PacWest’s CEO to reconnect about a potential deal.
Discussions continued from there, with the respective CEOs continuing to “exchang[e] ideas” about the structure of the potential transaction. The parties also began to conduct additional diligence on each other.
Banc of California determined that “in order to proceed with a transaction with PACW, the potential combined company would require an infusion of equity capital.”
Accordingly, as discussions with PacWest continued to progress, “BANC also negotiated and entered into confidentiality agreements with multiple potential investors and certain potential investors entered into joinders to the NDA to facilitate their due diligence review for purposes of evaluating participation in the proposed equity financing.”
These potential investors included Warburg and Centerbridge, which each had “several meetings” with “BANC management or JPM” in late June or early July.
Ultimately, Warburg and Centerbridge agreed to invest an aggregate of $400 million (up from the $350 million Banc of California had initially proposed in its LOI with PacWest).
Definitive agreements were signed and the transaction was announced on July 25.
From a regulatory perspective, the Bloomberg story linked above reported that the companies “have already received signals from regulators that the transaction will sail through the approvals process relatively quickly.”
That makes sense,1 although for understandable reasons the S-4 takes a more measured approach, including the standard risk factors that approval (and, for the Warburg/Centerbridge investors, confirmations of non-control) may not be obtained, or may not be obtained in a timely manner, or if obtained may come with unwelcome conditions, etc.
The filing does also note, however, that throughout the discussions between Banc of California and PacWest the “parties also provided updates with respect to the prospective transaction to federal and state regulatory authorities and continued to do so on a regular basis throughout the negotiation process.”
See this S&P Global Market Intelligence story quoting various folks who concur that the transaction is likely to be well received by regulators.