Canadian Imperial Bank of Commerce said on Thursday it has raised its offer for PrivateBancorp Inc by 20 percent to about US$4.9 billion, after some of the Chicago-based lender’s shareholders opposed an initial bid.
PrivateBancorp’s board has backed CIBC’s revised offer.
The move came ahead of a June 29 deadline for the deal to be approved and about nine months after the Canadian bank made its initial US$3.8 billion stock-and-cash offer. If successful, the acquisition would be CIBC’s biggest.
CIBC shares dropped 2.7 percent to $114.06 on Thursday, while PrivateBancorp shares jumped 5.5 percent to US$59.27.
The higher bid shines a light on CIBC’s desire to diversify into the U.S. market, yet highlights investor worries about whether the bank might be paying too much for the asset. CIBC is the most Canada-focused of the country’s major lenders.
“It raises some definite red flags on the Street. Investors are concerned that they might be overpaying,” said Colin Cieszynski, chief market strategist at CMC Markets Canada.
“Are they chasing something at the top of the market?” he said. “What happens if you pay up for this and then the U.S. bank stocks have a correction?”
PrivateBancorp shares have rallied since the initial offer and further since Donald Trump was elected U.S. president. The stock has benefited from upbeat sentiment as investors counted on potential tax cuts, an easing in financial regulations and higher interest rates to boost the U.S. banking sector.
PrivateBancorp postponed a shareholder vote on the deal in December because some investors resisted on the grounds that the business was undervalued in light of the new developments.
“I like the new offer. Without a competing bid, it seems like full-and-fair value,” said David Neuhauser, managing director of U.S. hedge fund Livermore Partners, which owns PrivateBancorp shares.
“It’s a good deal for all and it provides more value for PrivateBancorp shareholders,” he added. “I’m glad to see this get resolved before the summer.”
CIBC and PrivateBancorp expect the deal to close in the second quarter.
PrivateBancorp’s shareholders need to approve the deal with a vote scheduled in the middle of May.
(Reporting by John Tilak in Toronto and Sruthi Shankar in Bengaluru; Editing by Chizu Nomiyama and Paul Simao)
Photo courtesy of Reuters/Chris Wattie