UMPQ - Wall Street Is Panning This Merger -- Should It?
On Oct. 12, Columbia Banking System (NASDAQ: COLB) and Umpqua Holdings (NASDAQ: UMPQ) announced that the two smaller regional banks were joining hands to form a $50-billion-asset bank in California, Idaho, Nevada, Oregon, and Washington. Investors panned the deal, sending shares of Columbia, the buyer in the deal, down more than 14% on the day of the announcement. Shares of Umpqua, which received a nearly 13% premium from its price the day before the announcement, also fell nearly 5% with its shares tied to Columbia.
Let's take a look at why investors were so shaken by the deal.
Initially, the deal looks like a merger of equals (MOE), where two banks try to gain scale and spread a larger revenue pool over a smaller expense space, while gaining the ability to further invest in their technology. Like other announced bank MOEs over the past year, the two banks will split up the branding; Columbia Banking Systems will become the holding company, but Umpqua will maintain the brand of the subsidiary bank. Clint Stein, the CEO of Columbia, will become CEO of the combined entity, and the board of directors will be split, with seven members from each bank.
For further details see:
Wall Street Is Panning This Merger -- Should It?