Umpqua Holdings (Nasdaq: UMPQ) in Portland, Ore., has agreed to buy Sterling Financial Corp. (Nasdaq: STSA) in Spokane, Wash.
Umpqua will pay about $2 billion in cash and stock, of $30.52 a share, for the $9.9 billion-asset Sterling, the companies announced late Wednesday. Umpqua will have $22 billion in assets, $15 billion in loans and nearly 400 branches when it completes the acquisition in the first half of next year.
Greg Seibly, Sterling's chief executive, will serve as co-president at Umpqua Bank, sharing a title with Cort O'Haver.
"Together, Umpqua and Sterling will create something unique in the financial services industry, an organization that offers the products and expertise of a large bank but delivers them with the personal service and commitment of a community bank," Ray Davis. Umpqua's president and CEO, said in a press release. "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. We look forward to starting the process of bringing our companies together."
Umpqua was on a short list of companies that were believed to be interested in Sterling. Its name surfaced as the frontrunner in the past week. Sterling, meanwhile, follows the lead of Citizens Republic, another bank that opted to sell as it neared a $10 billion-asset threshold that would have meant increased regulatory scrutiny.
Funds affiliated with Thomas H. Lee Partners and Warburg Pincus, which own nearly 21% of Sterling's common stock, have agreed to support the transaction. Each firm has the right to designate a representative to Umpqua's board.
"We have been very pleased with what Sterling has achieved since we made our investment in 2010, and are delighted with the decision to combine with Umpqua," David Coulter, Warburg Pincus' vice chairman, said in the release. "Umpqua has a long record of achievement and creating shareholder value, and together with Sterling will create what we believe will be the leading community bank in the West."
Umpqua said it expects the acquisition to be 12% accretive to 2015 operating earnings per share. The deal is expected to dilute Umpqua's tangible book value per common share by about 5% at closing; it will take the company just over two years to earn that value back.
J.P. Morgan Securities was Umpqua's financial advisor; Wachtell, Lipton, Rosen & Katz served as legal counsel. Sandler O'Neill served as Sterling's financial advisor, while Davis Polk & Wardwell served as legal counsel.