CIBC sweetens offer for PrivateBancorp with more cash

Thu May 4, 2017 1:11pm EDT
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By Matt Scuffham

(Reuters) - Canadian Imperial Bank of Commerce (CM.TO: Quote) increased the cash element of its offer for Chicago-based PrivateBancorp Inc PVTB.O on Thursday in a final $4.9 billion bid to push the deal through ahead of a May 12 shareholder vote.

The cash-and-share offer restored the initial valuation of PrivateBancorp from CIBC's previous bid, offsetting a drop in the Canadian bank's shares driven by concerns about its housing market exposure that had eroded the earlier offer's stock-based component.

Canada's fifth-biggest lender, which is the most exposed to the country's housing markets, is keen to diversify its revenue stream and reduce reliance on its domestic market amid fears of a housing bubble in Toronto.

Pressure on CIBC to increase its offer for a second time intensified on Monday when shareholder advisory firm Institutional Shareholder Services (ISS) recommended PrivateBancorp shareholders vote against it. ISS cited concerns about Canada's housing market as one factor behind the recommendation.

An earlier shareholder vote was postponed in December after some PrivateBancorp investors had indicated they would reject CIBC's first offer.

CIBC has long coveted a major U.S. acquisition and PrivateBancorp looked to tick all the boxes by providing CIBC a platform to expand into the United States and offer U.S. banking services to Canadian clients. Meanwhile, regional U.S. banks have been consolidating in response to tough market conditions.

The initial $3.8 billion offer, pitched last June at what was then a healthy premium to PrivateBancorp's market value, seemed set for smooth passage to completion before Donald Trump's victory in the U.S. presidential election in November sent U.S. banking shares soaring.

Expectations of higher interest rates, lighter banking regulation and a lower corporate tax rate following Trump's election helped PrivateBancorp shares rise by more than a third, leaving CIBC with no choice but to pay more if it wanted to complete the deal.   Continued...

FILE PHOTO: The Canadian Imperial Bank of Commerce (CIBC) logo is seen outside their Bay Street headquarters in Toronto, Ontario, Canada March 16, 2017. REUTERS/Chris Helgren