U.S. Bancorp in Minneapolis has agreed to buy MUFG Union Bank in San Francisco.
The $559 billion-asset U.S. Bancorp said in a press release Tuesday that it will pay $8 billion in cash and stock to Mitsubishi UFJ Financial Group for the $133 billion-asset MUFG Union Bank. The deal, which is expected to close in the first half of 2022, priced MUFG Union Bank at 130% of its tangible book value.
Mitsubishi UFJ Financial Group will hold a roughly 2.9% stake in U.S. Bancorp when the deal closes.
The sale excludes MUFG Union Bank’s global corporate and investment bank, certain middle- and back-office functions and other assets.
MUFG Union Bank has more than 1 million consumer customers, 190,000 small business customers, $58 billion of loans and $90 billion of deposits.
The acquisition “underscores our commitment to strengthen and grow our business on the West Coast, make investments to serve customers and local communities and enhance competition in the financial services industry,” Andy Cecere, U.S. Bancorp’s chairman, president and CEO, said in the release.
“With MUFG Union Bank, we will increase access to state-of-the-art financial products while maintaining U.S. Bank’s strong track record of putting its customers and communities first,” Cecere added. “We are also committed to maintaining both organizations’ excellent records of serving low-income communities and supporting minority-led institutions.”
U.S. Bancorp said it would stay in every market that MUFG Union Bank currently serves in California, Washington and Oregon. It also plans to retain all of MUFG Union Bank’s front-line branch employees.
U.S. Bancorp said it expects the transaction to be 6% accretive to its 2023 earnings per share and 8% accretive when fully integrated. It should take less than two years to earn back an estimated 1% dilution to U.S. Bancorp’s tangible book value.
U.S. Bancorp plans to cut the combined company’s annual noninterest expenses by about $900 million. The company expects to incur $1.2 billion of merger-related charges.
The deal is the latest involving a foreign bank selling its U.S. operations.
Banco Bilbao Vizcaya Argentaria sold its U.S. bank to PNC Financial Services Group for $11.6 billion earlier this year. HSBC is planning to sell its U.S. retail operations to Citizens Financial Group in Providence, R.I., and Cathay General Bancorp in Los Angeles.
MUFG Union Bank entered into a consent order with the Office of the Comptroller of the Currency on Sept. 20. U.S. Bancorp said it evaluated and incorporated the regulatory issue into all aspects of the deal process, including due diligence, integration planning and valuation.
U.S. Bancorp has done business with MUFG Union Bank before, agreeing in January to buy its debt servicing and securities custody portfolio. That portfolio has about $320 billion of assets under management.
Goldman Sachs and Simpson Thacher & Bartlett advised U.S. Bancorp.