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.
The new offer, announced Thursday, would give PrivateBancorp shareholders the same amount of stock but increases the amount of cash. It now values PrivateBancorp at $60.43 a 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. On Thursday, PrivateBancorp's shares rose about 3% to $59.24.
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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 that the original offer as too low.
More recently, CIBC's own shares have declined along with other Canadian banking stocks amid the fallout from a run on deposits at Canadian lender Home Capital Group Inc. CIBC's stock fell about 2% Thursday in Toronto.
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.
Christopher McGratty, an analyst at Keefe, Bruyette & Woods, said that the new offer could help secure shareholder votes but 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. By contrast, more than 85% of CIBC's earnings are generated in Canada. The bank's heavy exposure to Canada, which has been weakened by a rout in energy and mining commodity prices, was a key motivation for its PrivateBancorp bid.
Another driver is the increased push by major Canadian companies into global markets. CIBC Chief Executive 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 U.S. business relationships would "atrophy," he said, if it failed to diversify outside of Canada.
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 email@example.com and Jacquie McNish at Jacquie.McNish@wsj.com
Corrections & Amplifications CIBC CEO Victor Dodig 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. An earlier version of this article didn't specify that Mr. Dodig was referring to the bank's U.S. business.
(END) Dow Jones Newswires
May 05, 2017 02:48 ET (06:48 GMT)