May 12, 2017 / 3:45 PM / 2 years ago

PrivateBancorp shareholders approve takeover by Canada's CIBC

TORONTO, May 12 (Reuters) - PrivateBancorp shareholders on Friday voted to approve a C$4.9 billion ($3.6 billion) purchase by Canadian Imperial Bank of Commerce, ending an 11-month takeover saga.

CIBC, which is the most domestically focused of Canada’s largest banks, has coveted a major U.S. acquisition to diversify from its home market. CIBC has the largest exposure among Canada’s major banks to residential mortgages and would be hit hard if fears of a housing bubble materialize.

The acquisition of Chicago-based PrivateBancorp, which focuses on commercial and high net worth clients, will give CIBC a platform for further U.S. expansion and provide its Canadian clients with U.S. banking services.

CIBC shares were down 0.3 percent, while PrivateBancorp stock was up 0.1 percent at $59.54.

The deal would contribute more than 10 percent of CIBC’s net income in the near term and over one-quarter over time, Victor Dodig, CIBC president and chief executive officer, has said.

CIBC had increased its offer twice to try to win the support of PrivateBancorp shareholders after an earlier stockholder vote was postponed in December after some investors said they would reject the deal.

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

After Trump’s election analysts expected higher interest rates, lighter banking regulation and a lower corporate tax rate. That boosted PrivateBancorp shares by more than one-third and left CIBC with no choice but to pay more if it wanted to complete the deal.

CIBC raised its takeover offer by 20 percent to about $4.9 billion in March.

However, CIBC’s U.S.-listed shares subsequently fell by nearly 10 percent, reducing the value of the share-based component of the offer.

Last week, CIBC said it would offer an additional $3 in cash for each PrivateBancorp share, raising that element to $27.20 per share. It left the stock component unchanged at 0.4176 of its shares for each of the U.S. bank’s shares.

The Canadian bank also pushed back the cutoff date for shareholders to receive its next quarterly dividend so that PrivateBancorp investors will be eligible for the payout, worth 39 cents per PrivateBancorp share, based on last quarter’s dividend. (Reporting by Matt Scuffham; Editing by Jeffrey Benkoe)

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