By Andrew R. Johnson
--Sterling to merge into Umpqua
--Combined company will have $22 billion in assets and about 400
branches
--Deal expected to close in the first half of 2014
Sterling Financial Corp. (STSA) announced Wednesday it will
merge into Oregon lender Umpqua Holdings Corp. (UMPQ) in a deal
valued at $2 billion, one of the largest bank transactions
announced this year.
The deal will form one of the largest community banks on the
West Coast, with $22 billion in assets and nearly 400 branches in
five states, the companies said late Wednesday.
Sterling, based in Spokane, Wash., will merge into Umpqua Bank,
based in Portland. Ray Davis, currently president and chief
executive officer of Umpqua Holdings, will continue leading the
combined company, while Greg Seibly, president and CEO of Sterling,
will become a co-president at Umpqua Bank.
"With our size, shared cultures and financial strength, our
combined organization will be uniquely positioned to deliver value
for our associates, customers, communities and shareholders," Mr.
Davis said in a statement.
Sterling's shares rose 8.3% to $28.76 in after-hours trading
Wednesday, while Umpqua's shares were inactive.
Analysts have predicted a wave of consolidation would hit the
banking industry as new capital requirements, lending regulations
and weak loan demand make it harder for banks to grow profits and
pressure them to cut costs.
But there have been few large bank transactions, in part due to
concerns over additional regulatory scrutiny such deals could
attract to banks, analysts have said.
A deal Buffalo, N.Y.-based lender M&T Bank Corp. (MTB)
announced last year to acquire Hudson City Bancorp Inc. (HCBK) for
$3.8 billion was delayed after the Federal Reserve in April raised
concerns about M&T's antimoney-laundering compliance
programs.
The Wall Street Journal reported Monday Umpqua was in talks to
buy Sterling.
Umpqua has expanded across the Pacific Northwest and the West
Coast through acquisitions in recent years. The bank, which
operates about 200 branches in Oregon, Washington, California and
Northern Nevada and has some $11 billion in assets, is known for
its quirky customer service.
The bank refers to its branches as "neighborhood stores" and
tellers and executives answer the phone: "Umpqua Bank--the world's
greatest bank." Umpqua reported net earnings of $26 million in the
second quarter, up 13% from a year earlier on strong loan
growth.
Sterling, with assets of about $10 billion and more than 170
branches, was hard hit by the housing-market downturn and a swell
of bad loans. In 2010, it raised $730 million from investors,
including private-equity firms Warburg Pincus LLC and Thomas H. Lee
Partners LP, its two largest shareholders.
The companies said Thomas H. Lee and Warburg Pincus have agreed
to vote in favor of the deal.
Under the deal, Sterling's shareholders will receive 1.671
shares of Umpqua common stock and $2.18 cash for each share of
Sterling common stock they own.
The companies said they expect to close the deal in the first
half of 2014, pending shareholder and regulatory approvals.
-Ryan Dezember and Kirsten Grind contributed to this story.
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com
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