CIBC announced that it has entered into a definitive agreement to acquire PrivateBancorp, Inc. and its subsidiary, The PrivateBank, a high-quality Chicago-based middle market commercial bank with U.S.$17.7 billion in assets, complemented by private banking and wealth management capabilities.
The transaction will significantly expand CIBC's reach in North America, and enable PrivateBancorp to continue building on its record of growth and client service under the leadership of its current management team. The acquisition will create a platform for CIBC to deliver U.S. banking services to its existing Canadian personal and business banking clients, accept deposits in the U.S., and provide commercial and private banking services to the clients of Atlantic Trust, following receipt of required approvals. Atlantic Trust, a leading U.S. private wealth management firm serving high net worth families, private foundations and endowments, was acquired by CIBC in fiscal 2014. For PrivateBancorp, the transaction will bring added financial strength, the benefits of a larger banking enterprise and deeper wealth management expertise to its clients across the U.S.
CIBC will pay U.S.$18.80 in cash and 0.3657 of a CIBC common share for each share of PrivateBancorp common stock. Based on the June 28, 2016 closing price of CIBC's common shares on the New York Stock Exchange (U.S.$77.11), the total transaction value is approximately U.S.$3.8 billion (C$4.9 billion) or U.S.$47.00 of value per share of PrivateBancorp common stock at announcement.
PrivateBancorp has approximately 1,200 employees, a leading presence in its hometown of Chicago, and a presence in 11 additional attractive U.S. markets. PrivateBancorp's clients include middle-market companies, as well as business owners, executives, entrepreneurs and families. PrivateBancorp also delivers specialty banking services to clients in specific industry segments, including healthcare and technology.
"Acquiring PrivateBancorp accelerates our strategy of building a strong, innovative and client-focused bank by creating opportunities to bank across borders for our Canadian clients, and offering more services to our private wealth clients at Atlantic Trust," said Victor G. Dodig, CIBC President and Chief Executive Officer.
"We see this as a long-term strategic transaction that creates a platform for growth across North America, expands and deepens our client relationships, and creates a broader, diversified, and more valuable CIBC for our shareholders, our clients, and our team."
Dodig added, "We were attracted to PrivateBancorp for the quality of its management team and its client-first culture, and look forward to PrivateBancorp's continued growth with CIBC's financial backing. With a shared focus to be number one in client relationships, we will work with PrivateBancorp's President and CEO, Larry Richman, and his team as we capitalize on the long-term opportunities ahead for our organizations, people, clients, business partners and the communities we serve."
Since 2007, The PrivateBank's leadership team has driven significant organic growth using a high-touch relationship-based approach, underpinned by strong risk management. As of March 31, 2016 PrivateBancorp had total assets of US$17.7 billion and a 9.8 per cent CET 1 ratio. PrivateBancorp has delivered a compounded annual loan growth rate of 16 per cent between year-end 2007 and 2015. Following completion of this transaction, Larry Richman will remain President and CEO of PrivateBancorp and The PrivateBank, will join CIBC's Executive Committee reporting to CEO Victor Dodig, and will take on the role of Head of CIBC's U.S. Region, which will include The PrivateBank, Atlantic Trust, and CIBC's U.S. Corporate Banking Business.
The total value of the consideration that PrivateBancorp common stockholders will receive upon the closing of the transaction will be based in part on the value of CIBC common shares at closing. CIBC will satisfy aggregate consideration payable to PrivateBancorp stockholders by paying approximately U.S.$1.5 billion in cash and issuing approximately 29.5 million CIBC common shares, representing an approximately 60 percent stock and 40 percent cash mix.
CIBC anticipates completing the transaction during the first calendar quarter of 2017, subject to satisfaction of customary closing conditions, including approval by PrivateBancorp's shareholders and receipt of regulatory approvals.
CIBC expects to maintain a Common Equity Tier (CET) 1 ratio at closing of at least 10 per cent. CIBC's CET 1 ratio was 10.4 per cent as at April 30, 2016 and since has been further strengthened by the receipt of net proceeds of the sale of our interest in American Century Investments.
The transaction is expected to be accretive to CIBC's adjusted earnings per share in year three.
PrivateBancorp will remain headquartered in Chicago and retain its Illinois state banking charter. CIBC will continue all of PrivateBancorp's community investment and charitable programs, and Larry Richman President and Chief Executive Officer and the PrivateBancorp executive team will continue to lead PrivateBancorp's efforts to support entrepreneurship, provide financial solutions and to serve all of its communities.
J.P. Morgan Securities LLC and CIBC World Markets Inc. served as financial advisors to CIBC in this transaction and J.P. Morgan Securities LLC provided a fairness opinion to the Board of Directors of CIBC. Goldman, Sachs & Co. served as exclusive financial advisor to PrivateBancorp and Sandler O'Neill & Partners, L.P. provided a fairness opinion to its Board of Directors.