CIBC hikes bid for PrivateBancorp by 20%

TORONTO — CIBC increased its takeover offer for Chicago-based PrivateBancorp by 20 per cent on Thursday in a bid to win shareholder approval for the takeover deal.

The offer values the U.S. financial services company at about C$6.6 billion, as CIBC raises both the number of shares it is offering and the amount of cash.

“We continue to believe that a merger between CIBC and PrivateBancorp is a compelling opportunity that offers immediate and long-term value for PrivateBancorp stockholders,” CIBC CEO Victor Dodig said in a statement.

“The transaction will create opportunities for CIBC to bank across borders for our Canadian clients, offer more services to our existing U.S. clients and expand PrivateBancorp’s client relationships.”

CIBC is now offering US$24.20 in cash and 0.4176 of a CIBC common share for each PrivateBancorp share — about US$60.92 per share based on closing stock prices Wednesday.

That compared with US$18.80 in cash and 0.3657 of a CIBC share in an offer last summer that was worth about US$50.95 per share on Wednesday.

“We are pleased to announce the revised terms of our proposed transaction with CIBC, which provides our stockholders with a significant increase in value as compared to the initial terms of the transaction,” PrivateBancorp chairman James Guyette said in a statement.

“The amended terms agreed between CIBC and PrivateBancorp reflect changes to trading market conditions and the interest rate environment since we announced the transaction in June 2016 as well as PrivateBancorp’s continued strong performance.”

A shareholder vote on the friendly deal that had been set for December was postponed as PrivateBancorp shares traded for more than CIBC’s initial offer.

Barclays analyst John Aiken suggested in a report to clients that the revised offer would likely be enough to get the deal over the finish line, but investors might not be happy with the cost.

“Admittedly, the environment has changed since CIBC initially announced its bid but the incremental bid gives a lot more of the economics to current PrivateBancorp shareholders,” Aiken said.

“We do not expect a favourable response and believe that CIBC will only be able to recover the lost valuation after it demonstrates to the market the benefits of the transaction to the bottom line.”

PrivateBancorp shares gained US$3.12 at US$59.32 in early afternoon trading on the Nasdaq market, while CIBC shares were down $2.81 at $114.39 on the Toronto Stock Exchange.

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