CIBC to buy PrivateBancorp for almost $5B in friendly deal

CIBC is offering to buy Chicago-based PrivateBancorp, Inc. in a friendly deal valued at $4.9 billion, or $3.8 billion US, as it seeks to grow its presence in the U.S. banking sector.

"We see this as a long-term strategic transaction that creates a platform for growth across North America, expands and deepens our client relationships, and creates a broader, diversified, and more valuable CIBC for our shareholders, our clients, and our team," CIBC's president and chief executive, Victor Dodig, said in the bank's announcement.

The deal requires various approvals, including from the Chicago bank's shareholders.

30% premium

The Toronto-based bank's offer is about 30.8 per cent above the Tuesday closing price for PrivateBancorp's shares.

Following the announcement, the U.S. bank's stockjumped to about $45.46 US in pre-market trade, from $35.93 US at the close. Meanwhile, CIBC's stock dropped about 1.5 per cent in pre-market trading.

PrivateBancorp has about 1,200 employees and a presence in 11 U.S. markets in addition to Chicago. It has about $17.7 billion US of assets under management.

Dodig said CIBC was attracted to the quality of the management team at PrivateBancorp and announced that its president and CEO, Larry Richman, would remain in those positions, and become head of the Canadian bank's U.S. region.

Richman said he looks forward to extending U.S. banking services to CIBC's Canadian clients and to the private wealth clients at Atlantic Trust, which is part of CIBC's current U.S. lineup.

"We believe this transaction allows us to not only continue our success but to achieve even more as our clients benefit from CIBC's financial strength, and our employees become part of a respected North American organization that shares our values and is strategically positioned for long-term growth," Richman said in a joint statement issued by CIBC.

CIBC says it's offering a combination of cash and CIBC sharesworth about $47 US per share to buy the U.S. company, which is listed on the Nasdaq stock market.

About $1.5 billion US of the purchase price would be paid in cash and the remainder with about 29.5 million common shares of CIBC, which is one of Canada's five biggest banks.

CIBC stock closed Tuesday at $100.48 in Toronto and $77.11 US onthe New York Stock Exchange.