A Deal That Banc of California Couldn’t Pass Up
SALE: Popular’s branches, $2.2 billion in assets, deposits to go to Irvine lender.
Originally published in LA Business Journal, James Rufus Koren
April 28, 2014
After buying two L.A. banks in the past 18 months, Steven Sugarman figured his Banc of California Inc. in Irvine was about done consolidating and ready to focus on organic growth.
After a flurry of bank mergers and acquisitions through the industry, Sugarman, Banc of California’s chief executive, said prices for banks had risen to a point where further deals weren’t as attractive.
But earlier this year, when he heard Puerto Rican bank holding company Popular was interested in selling its Southern California operations, Sugarman saw a bargain.
“If you would have asked two or three months ago, looking at the valuations of most bank transactions today, I would have looked at further M&A a little more skeptically,” he said. “I wouldn’t have believed there would be the opportunity to acquire $1.1 billion in deposits and a $1.1 billion loan portfolio for $5.4 million.”
Those are the terms of Banc of California’s deal with Popular, announced last week. The deal, pending regulatory approval, is expected to close by the end of the year.
The acquisition is about more than growing Banc of California’s assets. Sugarman said the 20 Popular Community Bank branches he’s acquiring – more than half of them in Los Angeles County – are in markets where Banc of California wants to be. Specifically, markets with lots of Latino entrepreneurs who aren’t well served by other lenders.
Banc of California local branches are mostly on the Westside, but Popular’s are mostly to the east and south in L.A. working-class cities such as Whittier, Downey and Santa Fe Springs.
“Latinos represent a bigger part of the population here, and a higher percentage of them are starting their own businesses,” he said. “It’s remarkable to us that they are underserved. This is the fastest-growing business banking segment in California.”
Banc of California focuses on business owners and professionals, and Sugarman said he should be able to pick up those customers in Popular’s territory.
“Large banks do a good job in these areas serving the mass-market consumer, but no one serves the professional class,” he said. “There’s a void in the market.”
Banc of California bought Century City’s Private Bank of California last year and Manhattan Beach’s Beach Business Bank in 2012. The bank also hired former L.A. Mayor Antonio Villaraigosa as an adviser.
Assuming the Popular deal closes, Banc of California will have assets of more than $5 billion in all, and branches from Santa Monica to San Diego. Sugarman said he expects the bank will now focus on growing without more acquisitions.
“We’ll continue to look at deals,” he said. “But my instinct is to tell you the mix of growth will shift more toward organic.”
Party Time
New York investment firm Apollo Global Management last week swooped into a bankruptcy auction to buy Inglewood’s Classic Party Rentals.
Financial terms of the deal were not disclosed, but publicly traded Apollo certainly paid more than a creditors’ consortium offered in a stalking-horse bid. Classic Party in February announced that it had signed the deal with the creditors but that it would go through a court-mandated auction process to get the best offer.
The deal, pending court approval, is expected to close next month.
Classic Party rents tables, chairs, linens, tents and other event supplies. The company grew rapidly through acquisitions before the recession, but took on a huge debt load in the process.
In Chapter 11 bankruptcy papers filed in Delaware earlier this year, the company reported liabilities of $246 million and assets of $148 million.
C-Suite News
Maria S. Salinas has been named chairwoman of downtown L.A. lender ProAmérica Bank, replacing Maria Contreras-Sweet, who was sworn in this month as head of the federal Small Business Administration. Salinas is president of accounting consultancy Salinas Consulting and was among ProAmérica’s co-founding directors. … Andre Cuerington has joined downtown L.A. asset management firm TCW Group as senior vice president and senior institutional marketer. He was formerly with Waterfall Asset Management in New York. … Stephen Sherline has been promoted to L.A. market leader for U.S. Bank’s Private Client Reserve, the bank’s wealth management practice for high-net-worth clients. Sherline was previously a senior vice president in the bank’s downtown L.A. office. … Conor McKenna has been promoted to managing director and head of West Coast operations for Reznick Capital Markets, part of accounting firm CohnReznick. He had been a director at the firm and is based in Century City. … Samuel Hirsch has joined El Segundo merger-and-acquisition advisory firm CriticalPoint Partners as managing director. He previously held the same title in the L.A. office of restructuring advisory firm Conway MacKenzie.