Don't Be Fooled by the Modest Price for West Coast Bancorp

American Banker, September 28, 2012 | Go to article overview

Don't Be Fooled by the Modest Price for West Coast Bancorp


Byline: Matthew Monks

West Coast Bancorp's (WCBO) deal to sell itself for $506 million to Columbia Banking System (COLB) shows how a good price is relative in M&A.

The price tag for the Lake Oswego, Ore., company a recapitalized in 2009 by a handful of hedge funds now interested in selling their 22% equity stake a equals 145% of its tangible book value. That is a modest price for the buyer in comparison with similar deals.

It ranks sixth in price to tangible book among 10 selected deals valued at $500 million to $5 billion since July 2010, according to data from Keefe, Bruyette & Woods (KBW). The figures ranged from the 250% UnionBanCal agreed in March to pay for Pacific Capital of Santa Barbara, Calif., to the 80% M&T (MTB) agreed in August to pay for Hudson City (HCBK) in Paramus, N.J.

In rendering a fairness opinion on Pacific Capital deal, Sandler O'Neill and Partners analyzed seven bank and thrift acquisitions nationwide worth at least $500 million between June 2009 and March 2012. The median price paid was164%.

Why would investors in the $2.4 billion-asset West Coast's such as Castle Creek Capital Partners, GF Financial, and MFP Partners agree to sell for a relatively low price?

There are two answers, and they involve investment time frames and other special considerations, experts say.

The hedge funds that recapitalized West Coast bought into the company at a price that works out to around $10 per share. They are selling for more than $23 per share three years later. …

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