TORONTO — CIBC is offering to buy Chicago-based PrivateBancorp, Inc. in a friendly deal valued at C$4.9 billion, or US$3.8 billion, as it seeks to grow its presence in the U.S. banking sector.
CIBC's president and chief executive, Victor Dodig, says the two companies will form a "very formidable" team that can provide complementary commercial banking and wealth management services in major U.S. centres.
He said CIBC currently can't provide a full suite of services — such as taking bank deposits — to its Canadian clients in the United States or to clients of its U.S.-based Atlantic Trust wealth management subsidiary.
There will be opportunities for PrivateBancorp, which operates as The Private Bank, to cross-sell services including deposit-taking accounts with Atlantic Trust, Dodig said.
"Commercial banking and wealth management really go hand-in-hand," Dodig told analysts on a conference call Wednesday.
"We see this in our existing business model here in the Canadian market. We see it in the business model that The Private Bank has, where they serve commercial banking clients and they've grown their wealth management business over time."
The deal requires various approvals, including from the Chicago bank's shareholders.
The Toronto-based bank's offer is about 30.8 per cent above the Tuesday closing price for PrivateBancorp's shares.
The U.S. bank's stock (Nasdaq:PVTB) jumped to US$43.85 shortly after regular trading began Wednesday, up more than 20 per cent from US$35.93 at the previous close. Meanwhile, CIBC's stock was down nearly four per cent in early trading..
Dodig said CIBC was attracted to the quality of the management team at PrivateBancorp and announced that its president and CEO, Larry Richman, would remain in those positions, and become head of the Canadian bank's U.S. region.
PrivateBancorp has about 1,200 employees and a presence in 11 U.S. markets in addition to Chicago. It has about US$17.7 billion of assets under management.
Richman said he looks forward to extending U.S. banking services to CIBC's Canadian clients and to the private wealth clients at Atlantic Trust, which is part of CIBC's current U.S. lineup.
"We believe this transaction allows us to not only continue our success but to achieve even more as our clients benefit from CIBC's financial strength, and our employees become part of a respected North American organization that shares our values and is strategically positioned for long-term growth," Richman said in a joint statement issued by CIBC.
CIBC says it's offering a combination of cash and CIBC shares (TSX:CM) worth about US$47 per share to buy the U.S. company, which is listed on the Nasdaq stock market.
About US$1.5 billion of the purchase price would be paid in cash and the remainder with about 29.5 million common shares of CIBC, which is one of Canada's five biggest banks.
CIBC stock closed Tuesday at C$100.48 in Toronto and US$77.11 at the New York Stock Exchange.
