Umpqua Holdings to Acquire Sterling Financial in $2 Billion Deal

In a combination of a stock and cash deal, Portland, Ore.-based regional bank Umpqua Holdings (NASDAQ: UMPQ  ) has agreed to acquire the outstanding shares of Spokane, Wash.-based Sterling Financial (NASDAQ: STSA  ) in a deal valued at approximately $2 billion, the companies announced yesterday.

Sterling shareholders will receive 1.671 shares of Umpqua stock and $2.18 in cash for each share of Sterling stock. Upon completion of the transaction, Umpqua will become the largest community bank in the West Coast region, with a combined $22 billion in assets and 394 branch locations in five states (Oregon, Washington, Idaho, California, and Nevada), according to Umpqua.

Upon completion of the merger, the company will operate under the Umpqua Bank name and brand. Existing shareholders of Umpqua are expected to own approximately 51% of the outstanding shares of the combined company at closing, and Sterling shareholders are expected to own approximately 49%. According to the companies' press release, the total value of the Sterling merger consideration, based on the closing price of Umpqua shares on Sept. 11, is $30.52.

Umpqua Holdings President and CEO Ray Davis commented in the statement, "With our size, shared cultures and financial strength, our combined organization will be uniquely positioned to deliver value for our associates, customers, communities and shareholders."

Davis will continue in his current roles at Umpqua Holdings upon completion of the transaction, and Sterling President and CEO Greg Seibly will join Umpqua Bank  as co-president, along with Umpqua Bank co-president Cort O’Haver.

The deal, which has been unanimously approved by both boards of directors and its two largest shareholders, is expected to be 12% accretive to Umpqua's 2015 operating earnings per share. Book value of the combined entity will decline 4.6% at closing, according to Umpqua, and will take an estimated two-and-a-half years to return to pre-acquisition value on a pro forma basis.

The transaction is expected to close in the first half of 2014 and is subject to customary closing conditions.

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