PacWest Bank’s Stock Soars After Merger News

PacWest Bank shares plummeted 27% on July 25, only to recover swiftly in after-hours trading following the announcement of its merger with Bank of California.

PacWest Bancorp stock fell from $10.33 to $7.50 in late-day trading on July 25, causing concern in the finance and cryptocurrency communities, with some speculating that “the next banking collapse” had begun.

According to Google Finance, share prices recovered in after-hours trading on July 25 and were valued at $10.10 at the time of writing.

PacWest’s July 25 merger with its smaller competitor, the Banc of California, sparked the rapid recovery, as both banks appeared to seek stability following the banking industry turmoil in early 2023.

The all-stock merger was supported by two private equity firms, Warburg Pincus and Centerbridge, which will provide $400 million in equity for a 19% stake in the combined company.

It is anticipated that the institutions will have approximately $36 billion in assets and over $25 billion in total loans.

Reuters reported that PacWest’s market capitalization is approximately $1.2 billion and Banc of California’s is approximately $764 million, for a total market capitalization of approximately $2 billion.

PacWest shareholders will receive 0.66 shares of common Banc of California stock. Asset sales will fund the repayment of approximately $13 billion in wholesale borrowings by the combined corporation.

In May, PacWest’s stock fell more than 60 percent, sparking concerns that it could be the next U.S. bank to fail, following Silicon Valley Bank, Signature Bank, and First Republic Bank.

The Federal Reserve’s emergency bank rescue loan facility, the Bank Term Funding Program, surpassed $100 billion at the end of June.