PacWest Bancorp (NasdaqGS:PACW) entered into a letter of intent to acquire Banc of California, Inc. (NYSE:BANC) from a group of shareholders in a reverse merger transaction on June 29, 2023. PacWest Bancorp (NasdaqGS:PACW) entered into a definitive agreement to acquire Banc of California, Inc. (NYSE:BANC) from a group of shareholders in a reverse merger transaction for approximately $850 million on July 25, 2023. Under the terms of the merger agreement, PacWest stockholders will receive 0.6569 of a share of Banc of California common stock for each share of PacWest common stock. Each outstanding share of 7.75% Fixed Rate Reset Non-Cumulative Perpetual Preferred Stock, Series A, of PacWest will be converted into the right to receive one share of a newly created series of substantially identical preferred stock of Banc of California with the same terms and conditions. PacWest will merge into Banc of California, and Banc of California, N.A. will merge into Pacific Western Bank. The combined holding company and bank will operate under the Banc of California name and brand following closing of the transaction. Upon completion of the proposed transaction, (a) the shares issued to PacWest stockholders in the merger are expected to represent approximately 47% of the outstanding shares of the combined company, (b) the shares issued to the Investors in the equity capital raise transaction discussed above are expected to represent approximately 19% of the outstanding shares of the combined company and (c) the shares of Banc of California common stock that are outstanding immediately prior to completion of the merger are expected to represent approximately 34% of the outstanding shares of the combined company. Jared Wolff, President and Chief Executive Officer of Banc of California, will retain the same roles at the combined company. John Eggemeyer, who currently serves as the independent Lead Director on the board of PacWest, will become the Chairman of the board of the combined company following the merger. The board of directors of the combined company will consist of 12 directors: eight from the existing BANC board, three from the existing PacWest board and one from the Warburg Investors. Todd Schell, who will join the board from Warburg Pincus. In case of termination of merger agreement, BANC or PACW may be required to pay a termination fee to the other party equal to $39.5 million in cash.

BANC also announced today that it has entered into investment agreements with affiliates of funds managed by Warburg Pincus LLC and certain investment vehicles, managed or advised by Centerbridge Partners, L.P. and its affiliates, which will invest an aggregate of $400 million for newly issued equity securities concurrently with, and subject to, closing of the merger. The proceeds from this capital raise are expected to be utilized in conjunction with other planned actions to reposition the combined company?s balance sheet and generate material savings. The combined company will repay ~$13 billion in wholesale borrowings, funded by sales of assets which are fully marked as a result of the transaction, and excess cash. Banc of California, N.A. has entered into a $3.5 billion interest rate swap and a contingent forward asset sale agreement to hedge interest rate risk and lock in proceeds. In the equity capital raise transaction, BANC will sell approximately (i) 21.8 million shares of its common stock at a purchase price of $12.30 per share and (ii) 10.8 million shares of a new class of its non-voting, common-equivalent stock at a purchase price of $12.30 per share to the Investors. In addition, the Warburg Investors will receive warrants to purchase approximately 15.9 million shares of Banc of California non-voting, common-equivalent stock, and the Centerbridge Investors will receive warrants to purchase approximately 3.0 million shares of Banc of California common stock, each with an exercise price of $15.375 per share.

The merger is subject to satisfaction of closing conditions, including receipt of customary required regulatory approvals and requisite approval by the stockholders of each of PACW and Banc, and the concurrent closing of the equity capital raise, equity financing, the effectiveness of the registration statement, receipt by each party of an opinion of its legal counsel, that the mergers, taken together, will qualify as a ?reorganization? within the meaning of Section 368(a) of the Code. The transaction has been unanimously approved by the boards of directors of both PACW and Banc. The BANC and PACW board of directors unanimously recommends that the respective stockholders vote for the merger. On October 5, 2023, the California Department of Financial Protection and Innovation granted its approval of the merger. As of October 19, 2023, the Board of Governors of the Federal Reserve System approved the merger. Banc of California and PacWest Bancorp receive Stockholder approvals for their merger, at their respective special meetings of stockholders held on November 22, 2023. The closing of the merger is expected to occur in late 2023 or early 2024, As of August 9, 2023, the transaction is expected to close in the fourth quarter of 2023 or first quarter of 2024. As of October 19, 2023, transaction is expected to close before the end of 2023. The transaction is expected to close as planned on or around November 30, 2023, subject to the satisfaction of certain closing conditions.

J.P. Morgan Securities LLC is acting as financial advisor and rendered a fairness opinion to the board of directors of Banc and is acting as sole placement agent to Banc. Sven G Mickisch, Brian D Christiansen, Tim J Gaffney, Matthew H Nemeroff and Bao Nguyen of Skadden, Arps, Slate, Meagher & Flom LLP are serving as legal counsels to Banc. Caspar Bentinck, Jonathan Doyle and Alex Bondroff of Piper Sandler & Co. is acting as financial advisor, due diligence advisor and rendered a fairness opinion to the board of directors of PACW. Patrick Brown of Sullivan & Cromwell LLP is serving as legal counsel to PACW. Jefferies LLC is acting as financial advisor to Warburg Pincus and Centerbridge. Wachtell, Lipton, Rosen & Katz is serving as legal counsel to Warburg Pincus. Simpson Thacher & Bartlett LLP is serving as legal counsel to Centerbridge. Margaret E. Tahyar, Richard D. Truesdell Jr., David L. Portilla and Lee Hochbaum of Davis Polk & Wardwell LLP acted as legal advisor to J.P. Morgan Securities LLC. For services rendered in connection with the mergers, BANC has agreed to pay JPM a fee of $12,000,000, $2,000,000 of which became payable upon the delivery of JPM?s opinion and the remainder of which will become payable only upon consummation of the mergers. Okapi Partners LLC acted as proxy solicitor to Banc and PACW. PACW has agreed to pay Okapi Partners LLC a fee of $25,000 plus the reimbursement of certain costs and expenses incurred in connection with the solicitation. BANC has agreed to pay Okapi Partners LLC a fee of $25,000 plus reimbursement. S. Silver, Freedman, Taff & Tiernan LLP acted as legal advisor to BANC. Computershare Inc. and Computershare Trust Company, N.A. jointly acted as transfer agent for BANC common stock. EQ Shareowner Services acted as transfer agent for PACW. Piper Sandler & Co. will receive a fee for financial advisory services in an amount equal to 1.0% of the aggregate purchase price. At the time of announcement of the transaction, Piper Sandler & Co.?s fee expected to be paid was approximately $26 million, of which, approximately $6.5 million has already been paid to PSC as of the date hereof and the remaining $19.5 million will be paid at the merger closing. PSC also received a $2 million fee from PACW for rendering its opinion.

PacWest Bancorp (NasdaqGS:PACW) completed the acquisition of Banc of California, Inc. (NYSE:BANC) from a group of shareholders in a reverse merger transaction on November 30, 2023.