Correction to Canadian Imperial Sweetens Its Offer for PrivateBancorp Story

By Christina Rexrode and Jacquie McNish Features Dow Jones Newswires

Canadian Imperial Bank of Commerce again sweetened its offer for PrivateBancorp Inc., its latest attempt to win over the shareholders of the Chicago-based bank.

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The new offer, announced Thursday, would give PrivateBancorp shareholders the same amount of stock, but it increases the amount of cash. It now values PrivateBancorp at $60.43 per share, or $4.9 billion overall, based on Wednesday's closing price. It is the second time in five weeks that CIBC, which has a market value of around $31 billion, has increased its offer.

CIBC's attempts to purchase PrivateBancorp have been fraught with turmoil, including a rise in U.S. bank stocks after the election that caused PrivateBancorp shareholders to protest the original offer as too low. More recently, CIBC's own shares have declined along with the rest of Canadian banking stocks amid the fallout from a run on deposits at Canadian lender Home Capital Group Inc.

Since Home Capital experienced a surge in deposit withdrawals in late April, CIBC's stock price has fallen about 5%. The shares opened slightly weaker Thursday following the announcement of its improved bid.

CIBC's second offer, in March, was worth about $61 a share when it was first made. It was worth $57.43 by Wednesday's close. CIBC's initial offer, made more than 10 months ago, valued PrivateBancorp at $47 a share.

Thursday's announcement was made by both banks. CIBC also said that PrivateBancorp shareholders will be eligible for the next CIBC dividend. PrivateBancorp shareholders will meet in Chicago next week to vote on whether to sell the bank to CIBC.

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Christopher McGratty, an analyst at Keefe, Bruyette & Woods, said that the new offer could help secure shareholder votes. But he added that it is almost exactly the same implied value as the March offer at the time it was made. Mr. McGratty said he believes CIBC's stock performance over the next week "could ultimately be the deciding factor" in the takeover.

How the situation at Home Capital plays out could also influence the takeover. Home Capital is reaching out to potential suitors to gauge interest, The Wall Street Journal reported Wednesday. The worry is that further instability at the lender could cause greater unease among investors in Canadian banks given soaring home prices.

CIBC suffered more from Home Capital's share meltdown than most other big Canadian banks because it is significantly more reliant on the Canadian market than its competitors. Many of them have already expanded into U.S. and Latin American markets.

Another driver is the increased push by major Canadian companies into global markets. CIBC chief Victor Dodig told analysts on a call last summer that many of the bank's corporate clients also do business with Canadian and international banks with U.S. operations. CIBC's business with them would "atrophy," he said, if it failed to diversify outside of Canada.

Besides a green light from PrivateBancorp shareholders, the deal also needs approval from some regulators in the U.S. and Canada. The banks said Thursday that Illinois regulators had given their approval this week. The banks said they "are confident that the remaining closing conditions" will be met.

Write to Christina Rexrode at christina.rexrode@wsj.com and Jacquie McNish at Jacquie.McNish@wsj.com

Corrections & Amplifications

This article was corrected at 5:44 p.m. ET because the original version didn't specify that Mr. Dodig was referring to CIBC's U.S. business when he told analysts on a call last summer that the bank's U.S. business would "atrophy" if the bank didn't diversify out of Canada.

Another driver is the increased push by major Canadian companies into global markets. CIBC chief Victor Dodig told analysts on a call last summer that many of the bank's corporate clients also do business with Canadian and international banks with U.S. operations. CIBC's business with them would "atrophy," he said, if it failed to diversify outside of Canada.

"Canadian Imperial Sweetens Its Offer for PrivateBancorp -- Update," published at 11:00 a.m. ET, didn't specify that Mr. Dodig was referring to the bank's U.S. business when he told analysts on a call last summer that the bank's U.S. business would "atrophy" if the bank didn't diversify out of Canada.

(END) Dow Jones Newswires

May 04, 2017 17:58 ET (21:58 GMT)