US Bancorp agrees to buy MUFG Union Bank for US$8b

[WASHINGTON] US Bancorp agreed to buy Mitsubishi UFJ Financial Group's US regional bank for about US$8 billion, expanding on the West Coast as consolidation in the finance industry intensifies.

The price for MUFG Union Bank NA includes US$5.5 billion in cash and about 44 million shares of US Bancorp common stock, according to a statement Tuesday.

The agreement excludes MUFG Union Bank's global corporate and investment bank and some of the company's middle- and back-office functions.

Large regional lenders such as US Bancorp and PNC Financial Services Group are bulking up through acquisitions and by purchasing foreign firms' US units, an attempt to compete with the retail-banking businesses of Wall Street giants.

JPMorgan and Bank of America have been moving into new states and are spending billions annually on digital offerings. PNC completed its US$11.6 billion takeover of Banco Bilbao Vizcaya Argentaria's US business in June.

The acquisition will make Minneapolis-based US Bancorp California's fifth-largest bank by deposits, a jump from No 10 currently, according to the statement. It adds more than 1 million customers and about 190,000 small-business clients.

"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," Andy Cecere, US Bancorp's chief executive officer, said in the statement.

MUFG, which acquired Union Bank in 2008 for about US$3.5 billion, had been weighing a sale, Bloomberg News reported last week.

MUFG will hold a minority stake of approximately 2.9 per cent in the U.S bank when the deal is completed. MUFG said in a presentation that the total transaction is worth about US$17.6 billion, including US$9.6 billion from dividends or share buybacks ahead of the sale.

MUFG Union Bank has about 300 branches and more than US$16 billion in equity capital, or book value, according to data from the Federal Deposit Insurance Corp.

The sale is estimated at about 1.3 times MUFG Union's tangible book value, according to the statement. US banks have sold at a median 1.4 times book value this year, data compiled by Bloomberg show.

BLOOMBERG