US Bancorp has agreed to buy the US regional bank from Mitsubishi UFJ Financial Group for around US $ 8 billion, spanning the west coast as consolidation in the financial sector intensifies.
MUFG Union Bank NA’s price includes $ 5.5 billion in cash and about 44 million US Bancorp common shares, according to a statement on Tuesday. The agreement excludes MUFG Union Bank’s global merchant and investment banking and some of the company’s middle and back-office functions.
Large regional lenders such as US Bancorp and PNC Financial Services Group Inc. are multiplying through acquisitions and buying US units of foreign companies, an attempt to compete with the retail banking businesses of the Wall Street giants. JPMorgan Chase & Co. and Bank of America Corp. have moved to new states and spend billions each year on digital offerings. PNC finalized in June its takeover of the American activities of Banco Bilbao Vizcaya Argentaria SA for 11.6 billion US dollars.
The acquisition will make Minneapolis-based US bank Bancorp California the fifth largest bank in terms of deposits, a jump from the tenth currently, the statement said. It adds over a million customers and approximately 190,000 small business customers.
“The acquisition of MUFG Union Bank underscores our commitment to strengthen and expand our West Coast business, invest to serve customers and local communities, and strengthen competition in the financial services industry,” said Andy Cecere, CEO of US Bancorp. in the statement.
MUFG, which acquired Union Bank in 2008 for around $ 3.5 billion, was considering a sale, Bloomberg News reported last week. MUFG will hold an approximate 2.9% minority stake in the US bank after the deal closes. MUFG said in a presentation that the total transaction was worth around $ 17.6 billion, including $ 9.6 billion in dividends or pre-sale share buybacks.
MUFG Union Bank has about 300 branches and more than US $ 16 billion in equity, or book value, according to data from the Federal Deposit Insurance Corp. The sale is estimated to be around 1.3 times the tangible book value of MUFG Union, the statement said. U.S. banks have sold at a median of 1.4 times book value this year, according to data compiled by Bloomberg.
Some U.S. bank mergers face headwinds in Washington, where the Biden administration has a new appetite for stronger antitrust enforcement. New Federal Trade Commission chair Lina Khan has signaled that the agency will take a tougher stance on approving mergers and reviewing pending deals.
The Japanese bank’s US unit on Monday received a cease and desist order from the Office of the Comptroller of the Currency, which cited the bank’s “dangerous or unhealthy practices” regarding technology and operational risk management , as well as non-compliance with safety standards.
US Bancorp “has assessed and integrated these regulatory concerns into all aspects of the transaction process,” it said in the statement. “The Company believes that it can successfully resolve the issues applicable to MUFG Union Bank in connection with the transaction, and that the order will not limit US Bancorp’s ability to operate and develop its business as intended.”
The deal is expected to be finalized in the first half of 2022, the statement said.