Columbia Banking Systems Inc. (NASDAQ: COLB) and Umpqua Holdings Corp (NASDAQ: UMPQ) announced plans to merge in a $5 billion all-stock transaction on Tuesday, creating one of the biggest entities on the West Coast.
Merged company to have $50 billion in assets
The merged company will have over $50 billion in assets, with the majority of the assets concentrated in California, Washington, and Oregon. Tacoma, Washington-based Columbia Banking Systems, the acquirer in the deal, is the smaller of the two companies. After completing the transaction, Columbia CEO Clint Stein will lead the merged entity, operating under the Umpqua Bank brand.
Unfortunately, investors were not sold on the transaction, and as a result, Columbia shares dropped 14% to $33.68 while Umpqua stock was down 4.7% to $19.93. D.A. Davidson & Co. managing director Jeffrey Rulis said, “Certainly the market has not been receptive to bank buyers. It’s been a shoot-first mentality.” Commenting in the deal, Stein said:
The bank never went into this or any other deal trying to do something to make our stock move one way or the other for one day. The real value that we’re going to create is long-term.
There is an uptick in mergers and acquisitions, and they are on track to have their best years since the 2008 financial crisis. According to Dealogic, Banks have finalized over $54 billion in deals since the start of the year through September. During the same period last year, banks had announced $17 billion in M&A.
Columbia acquired Bank of Commerce Holdings
Two weeks ago, Columbia finalized another acquisition in Sacramento, California-based Bank of Commerce Holdings. Its assets increased from $18 billion to $20 billion as a result of the transaction.
At the end of June, Umpqua’s assets totaled around $30 billion. As per the terms of the deal, each Umpqua share will receive 0.5958 Columbia shares. As a result, Umpqua stockholders will own roughly 62% of the combined entity once the acquisition closes, while Columbia stockholders will hold the remaining 38%.
Columbia Banking System will be the name of the merged holding firm, which will be domiciled in Tacoma. The banks expect the deal to finalize in the middle of next year.
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