U.S. Bancorp Enters Agreement to Acquire MUFG Union Bank

U.S. Bancorp entered into a definitive agreement to acquire MUFG Union Bank’s core regional banking franchise from Mitsubishi UFJ Financial Group in a transaction that will bring together two organizations with a focus on serving customers and communities in California, Washington and Oregon.

Under the terms of the agreement, U.S. Bancorp will purchase MUFG Union Bank for approximately $8 billion, including $5.5 billion in cash and approximately 44 million shares of U.S. Bancorp common stock. Upon close of the transaction, MUFG will hold a minority stake of approximately 2.9% in U.S. Bancorp. The transaction excludes the purchase of MUFG Union Bank’s Global Corporate & Investment Bank, certain middle and backoffice functions and other assets.

With the acquisition, U.S. Bank will gain more than 1 million consumer customers and about 190,000 small business customers on the West Coast in addition to approximately $58 billion in loans and $90 billion in deposits based on MUFG Union Bank’s June 30 balance sheet. The combination will improve U.S. Bank’s deposit position in California from 10th to fifth and will increase its customer base in California.

“The acquisition of MUFG Union Bank underscores our commitment to strengthen and grow our business on the West Coast, make investments to serve customers and local communities and enhance competition in the financial services industry. With MUFG Union Bank, we will increase access to state-of-the-art financial products while maintaining U.S. Bank’s strong track record of putting its customers and communities first. We are also committed to maintaining both organizations’ excellent records of serving low-income communities and supporting minority-led institutions,” Andy Cecere, chairman, president and CEO of U.S. Bancorp, said. “We have a great deal of respect for the MUFG Union Bank team and share customer-centric and relationship-based strategies and cultures based on integrity. We look forward to welcoming MUFG Union Bank to the U.S. Bancorp family.”

“We are very pleased to have reached this agreement, which will allow MUFG to focus and increase our resources on accelerating growth in our Americas wholesale businesses, specifically our corporate and investment banking, global markets, Japanese corporate banking and transaction banking businesses,” Kevin Cronin, MUFG regional executive for the Americas and CEO of MUFG Americas Holdings Corporation and MUFG Union Bank, said.

Following the closing of the transaction, U.S. Bank said it is committed to retaining all of MUFG Union Bank’s front-line branch employees.

U.S. Bancorp expects the transaction to be approximately 6% accretive to earnings per share in 2023, assuming a 75% synergy phase-in, and 8% accretive to earnings when fully integrated. The transaction has an estimated internal rate of return of more than 20%. The purchase price is estimated at 1.3 times MUFG Union Bank’s tangible book value, based on the expected capital to be delivered at close. U.S. Bancorp expects to achieve approximately $900 million in pre-tax cost synergies equal to 40% of estimated non-interest expenses through a combination of real estate consolidation, technology and systems conversion and other back-office efficiencies. U.S. Bancorp expects to incur merger charges of $1.2 billion.

MUFG Union Bank entered into a consent order with the Office of the Comptroller of the Currency on Sept. 20. U.S. Bancorp evaluated and incorporated these regulatory concerns into all aspects of the deal process, including due diligence, integration planning and valuation. The company believes it can successfully remediate the issues applicable to MUFG Union Bank in connection with the transaction, and that the order will not restrict U.S. Bancorp’s ability to operate and grow its business as planned.

The boards of directors of U.S. Bancorp and MUFG unanimously approved the transaction, which. The transaction is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals. The transaction is expected to close in the first half of 2022.

Goldman Sachs is serving as exclusive financial advisor and Simpson Thacher & Bartlett is serving as legal advisor to U.S. Bancorp.

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