CIBC sweetens merger bid
New deal values PrivateBancorp 30 per cent above initial $3.8B valuation
TORONTO — The Canadian Imperial Bank of Commerce has increased its bid to acquire Chicago-based PrivateBancorp Inc. by 20 per cent, the two banks announced on Thursday.
Under the new amended agreement, PrivateBancorp stockholders will receive, upon completion of the proposed merger with CIBC, $24.20 US in cash and 0.4176 of a CIBC common share for each common share of PrivateBancorp, according to a joint statement.
Based upon Wednesday’s closing price of CIBC’s shares in New York ($87.92 US), that works out to about $60.92 US per PrivateBancorp share.
The new deal values the U.S. bank at approximately $4.9 billion US — about 20 per cent above the current market value of the original deal and 30 per cent above the $3.8 billion US valuation at the time the offer was first announced in June.
“We continue to believe that a merger between CIBC and PrivateBancorp is a compelling opportunity that offers immediate and long-term value for PrivateBancorp stockholders,” said Victor Dodig, CIBC president and chief executive officer, in a statement.
“For CIBC stockholders, completing this acquisition accelerates our strategy of building a strong, innovative and client-focused bank. The transaction will create opportunities for CIBC to bank across borders for our Canadian clients, offer more services to our existing U.S. clients and expand PrivateBancorp’s client relationships.”
James Guyette, chairman of the board of PrivateBancorp, said the amended terms reflect changes to trading market conditions and the interest rate environment since the deal was originally announced.
“Our board believes in the long-term strategic value of the combination and, after careful consideration, unanimously supports the amended terms and continues to recommend that PrivateBancorp stockholders approve the transaction,” said Guyette in a statement.
John Aiken, an analyst with Barclays in Toronto, said the revised offer “gets it over the finish line for CIBC,” but warned investors may not like the cost.
“Admittedly, the environment has changed since CIBC initially announced its bid but the incremental bid gives a lot more of the economics to current PVTB shareholders, as evidenced by the anticipated accretion by 2020,” Aiken said in a note to clients Thursday. “We do not expect a favourable response and believe that CIBC will only be able to recover the lost valuation after it demonstrates to the market the benefits of the transaction to the bottom line.”
Keefe Bruyette & Woods analyst Brian Klock said that CIBC raised 2020 earning expectations for PrivateBancorp by about 12.5 per cent as part of the renewed bid, but expressed some concern at the valuation.
“We are bit surprised that CIBC increased its offer to what is essentially a premium on the run-up in PVTB’s share price post the U.S. presidential election,” Klock wrote in a note. “Our belief is that this is CIBC’s ‘best and final’ offer for the bank.”
Christopher McGratty, the KBW analyst who covers PrivateBancorp, said the new offer still falls short of his assessment of PrivateBancorp’s value both as a standalone entity and as part of a combined entity, and that as a result it may fail to attract sufficient shareholder support.
“Bottom line, we’re not sure this is enough,” he said.
PrivateBancorp shareholders are due to vote on the offer on or before May 4, after a previous vote scheduled for Dec. 8 was postponed after shares of U.S. banks soared following Donald Trump’s election, which made CIBC’s original offer less compelling. aligaya@postmedia.com Twitter.Com/Arminaligaya