NewsAlert:CIBC to buy Chicago-based bank

Canadian Imperial Bank of Commerce (CM) announced on Wednesday that it would be buying Chicago-based PrivateBancorp (PVTB) and its The PrivateBank subsidiary for $3.8 billion.

CIBC’s president and chief executive, Victor Dodig, says the two companies will form a “very formidable” team that can provide complementary commercial banking and wealth management services in major USA centres.

The Toronto-based bank says the current president and CEO of PrivateBancorp will remain in those positions and become head of CIBC’s USA region.

PrivateBancorp, founded in 1989 and led by Larry Richman, has 35 commercial offices and 24 branches across the USA with $9.6 billion in assets under administration, CIBC said in a presentation on its website.

CIBC’s offer is about 30.8 per cent above the Tuesday closing price for PrivateBancorp’s shares.

The move expands CIBC’s banking offerings in the U.S.to allow Canadian customers to accept deposits in the USA while also expanding its presence in North America.

CIBC said it would pay $18.80 in cash and 0.3657 of a CIBC share for each share of PrivateBancorp stock.

About US$1.5 billion of the purchase price would be paid in cash and the remainder with about 29.5 million common shares of CIBC. This reflected the market’s expectation that the price of CIBC shares would fall following the deal, given the strain it puts on CIBC’s capital strength and earnings in the short term.

The transaction, which is subject to regulatory and shareholder approvals, is expected to close in the 2017 first quarter.

“Commercial banking and wealth management really go hand-in-hand”, Dodig told analysts on a conference call Wednesday.

Dodig called Chicago one of the most attractive banking markets in the US, noting that its high net-worth market is larger than CIBC’s Canadian market.

J.P. Morgan Securities LLC and CIBC World Markets Inc are CIBC’s financial advisers for the transaction and Mayer Brown LLP, Sidley Austin LLP and Torys LLP are its legal advisers.

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