Columbia Banking System, the parent company of Columbia State Bank, and Umpqua Holdings Corporation, the parent company of Umpqua Bank, entered into a definitive agreement under which the companies will join together in an all-stock combination.
Under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, Umpqua shareholders will receive 0.5958 of a share of Columbia stock for each Umpqua share they own. Upon completion of the transaction, Umpqua shareholders will own approximately 62% of the combined company, while Columbia shareholders will own approximately 38%. Once the transaction is completed, the combined organization will have more than $50 billion in assets.
“This is an exciting combination that brings together two well-respected organizations and talented teams, accelerating our shared strategic objectives to create the leading regional bank headquartered in the West,” Cort O’Haver, president and CEO of Umpqua, said. “Together, with increased scale, we’ll have the ability to provide expanded opportunities for associates and serve customers through an even more comprehensive suite of solutions. We’ll also be able to strengthen our ongoing investment in our communities and deliver tremendous value for shareholders. I look forward to partnering with the Columbia team to expand our market share as a combined organization.”
“This is a historic partnership that will enhance what both banks are able to do for clients, team members and communities while driving significant value for our shareholders,” Clint Stein, president and CEO of Columbia, said. “Importantly, Umpqua shares our values and relationship-based business model. We believe blending the complementary expertise, services and innovative technology of both banks will position the combined organization as the preferred bank for business and families across the West. We look forward to bringing our companies together to better serve all stakeholders.”
The combined company will have $43 billion in deposits, including $16 billion of deposits in Oregon, $15 billion in Washington, $10 billion in California and $2 billion collectively in Idaho and Nevada. This transaction will also result in a more diversified revenue mix with approximately $33 billion in loans and fee-based income sources. In addition, Columbia and Umpqua will together contribute $20 million to the charitable foundation of the combined company following the close of the transaction.
The transaction is projected to deliver approximately 25% cash EPS accretion and 23% GAAP EPS accretion to Columbia and approximately 11% cash EPS accretion and 8% GAAP EPS accretion to Umpqua in 2023, assuming fully phased-in cost savings. The transaction is also expected to deliver approximately $1.1 billion of value creation based on cost synergies. The combined company expects to achieve 15% ROATCE and 1.3% ROAA in 2023, assuming fully phased-in cost savings.
O’Haver will serve as the executive chairman and Stein will serve as the CEO of the combined company. Chris Merrywell will serve as president of consumer banking. Tory Nixon will serve as president of commercial banking. Ron Farnsworth will serve as CFO. Upon closing of the transaction, the combined company’s board will consist of seven directors from each of Columbia and Umpqua, with Craig Eerkes, the current chairman of Columbia, serving as the lead independent director.
The combined holding company will operate under the Columbia Banking System name and will be headquartered in Tacoma, WA. The combined bank will operate under the Umpqua Bank name and will be headquartered in the greater Portland, OR, metropolitan area. Other major subsidiaries and divisions will include Columbia Trust Company, CB Financial Services and Columbia Private Bank, which will operate under the banner of Columbia Wealth Management, as well as Financial Pacific Leasing. The company will trade under Columbia’s ticker symbol (COLB) on the Nasdaq Stock Market.
The transaction is expected to close in mid-2022, subject to the satisfaction of customary closing conditions, including receipt of regulatory approvals and approvals from each company’s shareholders.
Keefe, Bruyette & Woods is serving as financial advisor and Sullivan & Cromwell is serving as legal counsel to Columbia. J.P. Morgan Securities is serving as financial advisor and Wachtell, Lipton, Rosen & Katz is serving as legal counsel to Umpqua.