U.S. Bancorp has entered into a definitive agreement to acquire MUFG Union Bank’s core regional banking franchise from Mitsubishi UFJ Financial Group in a transaction that will bring together two premier organizations with a focus on being the leader in serving customers and communities in California, Washington and Oregon.
Under the terms of the agreement, U.S, Bancorp will purchase MUFG Union Bank for approximately $8 billion, including $5.5 billion in cash and approximately 44 million shares of U.S. Bancorp common stock. Upon close of the transaction, MUFG will hold a minority stake of approximately 2.9% in U.S. Bancorp. The transaction excludes the purchase of MUFG Union Bank’s Global Corporate & Investment Bank, certain middle and back office functions, and other assets.
With the acquisition, U.S. Bank will gain more than 1 million loyal consumer customers and about 190,000 small business customers on the West Coast in addition to approximately $58 billion in loans and $90 billion in deposits based on MUFG Union Bank’s June 30, 2021 balance sheet. The combination will improve U.S. Bank’s deposit position in California from 10th to 5th and will significantly increase its customer base in California.
This increased scale will make the U.S. Bank brand a stronger player in these markets, which will increase competition with California’s three largest banks. This will provide benefits for both customers and the communities served by the combined organization through improved technology, products and customer choice.
“The acquisition of MUFG Union Bank underscores our commitment to strengthen and grow our business on the West Coast, make investments to serve customers and local communities and enhance competition in the financial services industry. With MUFG Union Bank, we will increase access to state-of-the-art financial products while maintaining U.S. Bank’s strong track record of putting its customers and communities first. We are also committed to maintaining both organizations’ excellent records of serving low-income communities and supporting minority-led institutions,” said Andy Cecere, chairman, president and chief executive officer of U.S. Bancorp. “We have a great deal of respect for the MUFG Union Bank team and share customer-centric and relationship-based strategies and cultures based on integrity. We look forward to welcoming MUFG Union Bank to the U.S. Bancorp family.”
“We are very pleased to have reached this agreement which will allow MUFG to focus and increase our resources on accelerating growth in our Americas wholesale businesses – specifically our corporate and investment banking, global markets, Japanese corporate banking and transaction banking businesses,” said Kevin Cronin, MUFG Regional Executive for the Americas and CEO of MUFG Americas Holdings Corporation and MUFG Union Bank, N.A.
Enhances U.S. Bank’s ability to serve customers
The acquisition of MUFG Union Bank will provide U.S. Bank with the ability to better serve customers of both organizations.
U.S. Bank continues to invest in innovative technology that meets customer needs and helps them interact with their financial institution how, when and where they want. Accelerated by the COVID-19 pandemic, 80 percent of U.S. Bank transactions are now being done digitally, a trend the bank expects will continue. These industry-leading digital tools allow customers to bank anywhere and however they choose in a way that is safe, simple and convenient.
The U.S. Bank mobile app was recently named No. 1 among all U.S. financial institutions, in addition to having a 4.8 App Store rating. U.S. Bank also was top-rated overall for all mobile banking (mobile app combined with mobile web). U.S. Bank will bring these industry-leading technologies, which offer superior functionality and breadth of service, to MUFG Union Bank customers.
The combination will help meet the evolving needs of customers of both MUFG Union Bank and U.S. Bank by providing greater access to digital banking tools and by providing an expanded branch network. These enhancements will improve customer choice and, as a result, create a stronger banking competitor across the West Coast.
Demonstrates further commitment to local communities
U.S. Bank is committed to staying in every market that MUFG Union Bank currently serves in California, Washington and Oregon. Although banking is increasingly being done online, U.S. Bank strongly believes the future of banking includes a combination of the digital and physical world – both do-it-yourself and do-it-together. Customers appreciate the opportunity to visit their local branch or engage with professionals within their local communities to have a meaningful conversation about their financial goals, future and aspirations.
The combination also will enhance U.S. Bank’s ability to commit to, invest in and serve low and moderate-income communities and minority-led institutions. Importantly, U.S. Bank already proudly invests in its communities, and in 2020 invested $67 million in corporate contributions and foundation giving, including $30 million to support COVID-19 relief and recovery efforts. In addition, U.S. Bank made $116 million in annual, incremental investments to address racial and economic inequalities; spent more than $560 million with diverse suppliers; our employees donated $12 million through the employee giving campaign; and the bank provided $6.2 billion in capital to revitalize communities, including Paycheck Protection Program (PPP) loans.
Earlier this year, U.S. Bank – which has been named one of the World’s Most Ethical Companies for seven consecutive years – launched the U.S. Bank Access Commitment, a long-term approach led by the bank’s diversity, equity and inclusion team. It brings together the strengths of the U.S. Bancorp Community Development Corporation, corporate social responsibility and our business areas to help build wealth while redefining how we serve diverse communities and provide more opportunities for diverse employees.
Provides opportunities for front-line branch and other employees
Following the closing of the transaction, U.S. Bank is committed to retaining all of MUFG Union Bank’s front-line branch employees. These bankers are frequently the first people customers and prospective customers speak to. They have demonstrated a tremendous ability to serve MUFG Union Bank’s customers, and U.S. Bank looks forward to having these branch employees join the bank’s team of talented West Coast employees.
For MUFG Union Bank employees, joining a regional bank with increased scale and a larger U.S. geographic footprint will allow for additional opportunities for advancement and ways in which they can build a banking career.
Transaction Details
U.S. Bancorp expects the transaction to be approximately 6% accretive to earnings per share in 2023 assuming a 75% synergy phase-in and 8% accretive to earnings when fully integrated. The transaction has an estimated internal rate of return of more than 20%. The purchase price is estimated at 1.3 times of MUFG Union Bank’s tangible book value, based on the expected capital to be delivered at close. U.S. Bancorp expects to achieve approximately $900 million in pre-tax cost synergies equal to 40% of estimated non-interest expenses through a combination of real estate consolidation, technology and systems conversion and other back office efficiencies. U.S. Bancorp expects to incur merger charges of $1.2 billion.
MUFG Union Bank entered into a consent order with the Office of the Comptroller of the Currency on September 20, 2021. U.S. Bancorp evaluated and incorporated these regulatory concerns into all aspects of the deal process, including due diligence, integration planning and valuation. The company believes it can successfully remediate the issues applicable to MUFG Union Bank in connection with the transaction, and that the order will not restrict U.S. Bancorp’s ability to operate and grow its business as planned.
The transaction has been unanimously approved by the boards of directors of U.S. Bancorp and MUFG. The transaction is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals. The transaction is expected to close in the first half of 2022.
Advisors
Goldman Sachs & Co. LLC is serving as exclusive financial advisor and Simpson Thacher & Bartlett LLP is serving as legal advisor to U.S. Bancorp.