Mechanics Bank to buy Rabobank’s US unit for $2.1 billion
Mechanics Bank agreed to buy Dutch lender Rabobank Group’s U.S. operations for about $2.1 billion, bringing together two California lenders and extending the combined company’s reach throughout much of the state.
Mechanics, based in Walnut Creek, California, is gaining Rabobank’s U.S. retail, business-banking, commercial real estate, mortgage and wealthmanagement businesses, the companies said in a statement Friday. The unit, Rabobank NA, has more than $13 billion in assets and 100 branches, while Mechanics has more than $6 billion and 44 branches throughout the state.
“We are two established institutions with values and principles that align closely,” Mechanics Chief Executive Officer John DeCero said in the statement. “There’s very little geographic overlap and significant potential for value creation for both parties to this combination.”
The deal’s the latest in what may be the beginning of a round of U.S. bank consolidation as lenders seek greater scale and the ability to make technology investments. Consolidation would allow divestment by foreign lenders wanting to exit the U.S. market, as well as purchases by banks looking to grow. In February, BB&T agreed to buy SunTrust Banks for $28 billion in the world’s largest bank merger in more than a decade.
The Rabobank deal will give more outposts across California to Mechanics, whose branches are concentrated in the East Bay region of Northern California. Rabobank’s branches are spread from Sacramento south to the Mexican border.
Mechanics is controlled by Dallas-based private equity firm Ford Financial Fund, which owns 79 per cent of the bank’s shares through its Ford Financial Fund II. Rabobank Group will receive 9.9 per cent of the outstanding Mechanics shares. The deal, approved by the boards of both banks, is expected to close in the third quarter.
Not included in the transaction are Rabobank NA’s food and agribusiness assets, which will largely be transferred to an affiliate, St Louis-based Rabo AgriFinance.