San Francisco-based Union Bank – a unit of UnionBanCal Corp. – closed the acquisition of Atlanta-based Smartstreet. Prior to the completion of the acquisition, Smartstreet was a financial services division of PNC Financial Services Group Inc. (PNC). UnionBanCal Corp. is a fully owned subsidiary of Mitsubishi UFJ Financial Group, Inc. (MTU), also known as MUFG.
The financial terms of the agreement were undisclosed. However, market rumors indicate the purchase price to be roughly $126 million. Smartstreet will retain its brand in the markets and work with its existing executive team, operating as a unit of Union Bank.
Smartstreet, a provider of banking services to homeowners associations and community association management companies worldwide, became a part of PNC Financial in March 2012, at the time of purchase of RBC Bank (USA), the U.S. retail banking subsidiary of Royal Bank of Canada (RY).
This financial services division is also a leader in community associations banking services with deposit base worth $1 billion and provides services such as banking and account management, payment processing and lockbox services, association loans and lines of credit, credit card services as well as website hosting and designs.
Union Bank is a leader in providing banking services to homeowners' associations in the West Coast.
The completion of the transaction combines Smartstreet and Union Bank’s banking services and would help serving the widespread client portfolio across the United States. The combined entity would ensure the offering of a wide and improved array of products, which will lead to industry-wide growth.
Further, Smartstreet's healthy base of core deposits will provide short term as well as long-term benefits to Union Bank. Smartstreet's extensive and well known Homeowner Association (:HOA) banking franchise as well as the combined strengths of both of these companies in comprehensive receivables and national lockbox processing will also be advantageous.
Moreover, the acquisition of Smartstreet would brighten Union Bank’s prospects of becoming the industry leader in providing banking services to management companies. We believe the acquisition will improve the revenues of Union Bank’s Global Treasury Management unit as well.
MUFG retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain our long-term Neutral recommendation on the stock.
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