Sterling Bank to merge with Umpqua

Umpqua Holdings Corporation and Sterling Financial Corporation announced Sept. 11 that they have entered into a definitive agreement pursuant to which Sterling will merge with and into Umpqua. The transaction will have a total value of approximately $2.0 billion.

The merger will result in the West Coast’s largest community bank with expanded geographic reach.

The combined organization will have approximately $22 billion in assets, $15 billion in loans and $16 billion in deposits, with 5,000 associates and 394 stores across five states – Oregon, Washington, Idaho, California and Nevada.

Umpqua and Sterling have also agreed to establish and fund a $10 million community foundation, underscoring their mutual commitment to serving their communities.

Upon completion of the merger, the company will operate under the Umpqua Bank name and brand. It will continue to deliver the high-touch level of service that Umpqua and Sterling customers expect, with an expanded branch and ATM network and a broad range of products and expertise in retail, small business, private and corporate banking; asset and wealth management; and securities brokerage.

Umpqua Holdings Corporation will continue to be led by Ray Davis as president and CEO. Sterling president and CEO Greg Seibly will join Umpqua Bank as co-president, with Umpqua Bank co-president Cort O’Haver serving in the same capacity.

The boards of directors of both companies have unanimously approved the transaction. Upon completion, the combined Company’s board will have 13 directors, comprised of nine representatives from Umpqua and four representatives from Sterling. Peggy Fowler will continue as board chair.

Funds affiliated with Thomas H. Lee Partners, L.P. (THL) and Warburg Pincus (WP), the two largest shareholders of Sterling, each owning approximately 20.8 percent of Sterling’s outstanding common stock, have agreed to vote in favor of and fully support the transaction, and THL and WP have the right to designate a representative of each firm to serve on the board of directors of the combined company following closing.

Under the terms of the agreement, Sterling shareholders will receive 1.671 shares of Umpqua common stock and $2.18 cash for each share of Sterling common stock. The total value of the Sterling merger consideration, based on the closing price of Umpqua shares on Sept. 11 of $16.96, is $30.52.

The transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes and Sterling shareholders are not expected to recognize any taxable gain or loss in connection with the share exchange to the extent of the stock consideration received.

Giving effect to the transaction, existing shareholders of Umpqua are expected to own approximately 51 percent of the outstanding shares of the combined company at closing, and Sterling shareholders are expected to own approximately 49 percent.

Umpqua expects the acquisition to be 12 percent accretive to 2015 operating earnings per share with 100 percent of synergies phased in. Tangible book value per common share is expected to be diluted by 4.6 percent at closing, with a two-and-one-half year earnback on a proforma basis.

Completion is expected during the first half of 2014, and is subject to approval by each company’s shareholders, regulatory approvals and other customary closing conditions.