HomeStreet finds new buyer in Mechanics Bank in California
HomeStreet in Seattle has a new agreement to sell itself four months after a deal to sell to FirstSun Capital Bancorp in Denver fell through.
The $16.5 billion-asset Mechanics Bank in Walnut Creek, Calif., said in a press release that it will buy the $8 billion-asset HomeStreet in an all-stock transaction. While HomeStreet is issuing stock to Mechanics’ shareholders, Mechanics’ shareholders will own 91.7% of the company (Ford Financial Fund and its affiliates will own 74.3%).
The deal, which is expected to close in the third quarter, values HomeStreet at a pre-transaction estimated equity value of $300 million and Mechanics at $3.3 billion.
HomeSteet will be renamed Mechanics Bancorp and remain publicly traded. The ratio of commercial real estate loans to total risk-based capital will be 390% when the deal closes.
“This is a very significant milestone for Mechanics Bank and we are excited through this transaction to extend our market presence with a full West Coast footprint from San Diego to Seattle,” Carl B. Webb, Mechanics’ chairman, said in the release. “This strategic merger also provides us with the opportunity to become a publicly-traded bank holding company, which better positions Mechanics Bank for future opportunities.”
One HomeStreet director will join the combined company’s board. Mark Mason, HomeStreet’s chairman, president and CEO, will remain at the company in a consulting capacity for two years.
FirstSun agreed in January to buy HomeStreet for $286 million. As part of the transaction, FirstSun planned to raise capital and HomeStreet planned to sell commercial real estate loans. The companies were unable to obtain regulatory approval and HomeStreet subsequently unloaded a significant amount of multifamily loans.
Wachtell, Lipton Rosen & Katz and J.P. Morgan Securities advised Mechanics. Sullivan & Cromwell and Keefe, Bruyette & Woods advised HomeStreet.