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The Treasury Department in 2010 took a massive haircut on its investment in Pacific Capital and now stands to make roughly 90 cents on the dollar from the bank's sale to UnionBanCal. It's a reminder that taking your lumps early on problem assets can be beneficial.
March 15 -
UnionBanCal is taking the unusual step of marking up the value of Pacific Capital's loan portfolio as part of its $1.5 billion deal for the Santa Barbara, Calif., lender.
March 12
Why did Pacific Capital Bancorp (PCBC) agree to sell itself last month to UnionBanCal?
It got an offer it couldn't refuse.
That is the simple answer Pacific Capital gives in a
UnionBanCal's cash offer of $46 per share was too good for the $6.3 billion-asset Pacific Capital and its majority owner, Texas financier Gerald Ford, to pass up, according to the April 6 filing.
It values the once-ailing Pacific Capital at a premium to the median price in seven other U.S. bank deals worth more than $500 million since June 2009, according to the fairness opinion rendered by Pacific Capital's financial advisor, Sandler O'Neill & Partners.
UnionBanCal's offer — after certain adjustments — equals 177% of Pacific Capital's tangible book value. The median deal value was 164% price-to-tangible book, the Sandler O'Neill opinion said.
The offer is also a 63% premium to Pacific Capital's closing share price of $28.26 on March 7, or two days prior to the day the parties signed the deal. That is well above the median 32% market premium in the other transactions. (Pacific Capital was trading at $45.35 at mid-day Thursday.)
Being paid in cash — rather than stock — would deliver "immediate and certain value" to Pacific Capital shareholders, the proxy states. Pacific Capital agreed to the deal because it worried that its shares might never trade as high as $46, and that it might not fetch a price that high in a future transaction, it states.
Ford was also "in favor of the deal," it states. Ford is Pacific Capital's chairman and holder of 75% of its stock via his investment company, the Ford Financial Fund of Dallas. He invested $500 million in 2010 for a stake valued at $1.5 billion.
Pacific Capital also cited its need to
UnionBanCal, based in San Francisco, made an unsolicited advance toward Pacific Capital late last year and initially offered a price of $42 per share in early 2012, the proxy states. UnionBanCal upped its offer to $46 in March after Pacific Capital rejected its first offer as too low.
The parties have agreed to establish a $5 million bonus pool to be doled out to Pacific Capital employees that stay on until the merger is scheduled to close in the fourth quarter. Carl B. Webb, the chief executive of Pacific Capital, has agreed not to participate in that pool, the proxy states.
Furthermore Webb, who is also a senior principal of the Ford fund, has declined to receive any salary or equity awards from Pacific Capital since taking the helm of the company in August 2010. He owns 20,000 Pacific Capital shares worth about $920,000.
UnionBanCal, with nearly $90 billion of assets and 414 branches, is owned by the Bank of Tokyo-Mitsubishi UFJ, which is part of the Mitsubishi UFJ Financial Group (MTU).
