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Canadian Imperial (CM) Completes PrivateBancorp Deal for $5B

Zacks Equity Research

Canadian Imperial Bank of Commerce CM has finally completed the much-awaited acquisition of PrivateBancorp, Inc. on Jun 23, 2017 for $5 billion. Per the deal, which is expected to be accretive to CIBC’s earnings per share within three years, the company will pay $2.4 billion in cash and roughly 32.3 million of its shares.

This acquisition is the largest for CIBC since inception and will likely help it move forward with its growth plans in the U.S.

CIBC’s President and CEO, Victor Dodig, said, "By combining the resources, capabilities and the talented teams of our two organizations, we are creating a strong cross-border platform for CIBC to serve a broader range of clients and deliver growth to our shareholders. Our shared passion and commitment to fostering a client-first culture, will serve us well as we work to build integrated U.S. businesses and establish CIBC as a strong, innovative relationship-oriented North American bank."

Though shares of CIBC declined nearly 1.1% following the deal closure announcement, it actually gained 2.2% since the deal got confirmed on May 12 with the approval of shareholders. Before this approval, the deal was amended twice, for PrivateBancorp to consider it fruitful enough.

CIBC will operate PrivateBancorp under its own name with some rebranding starting in the fiscal fourth quarter.

Larry Richman, President and CEO of PrivateBancorp will become Senior Executive Vice-President and Group Head for CIBC’s U.S. region.

He said, "On behalf of The PrivateBank team, we are delighted to be joining CIBC”.

Richman added, "From the very beginning, this transaction was about giving us added financial strength and the benefits of a larger banking enterprise to do more for our clients and our communities. This new combination will, over time, allow us to build a premier North American bank to deliver a broader set of products and services through our differentiated, relationship-based approach."

Notably, in the last one year, shares of Canadian Imperial have increased 2.6%, significantly underperforming the Zacks categorized Banks - Foreign industry’s rally of nearly 32%.

Also, the company’s Zacks Consensus Estimate for the current fiscal year has been marginally revised downward in the last 60 days. As a result, Canadian Imperial carries a Zacks Rank #4 (Sell). However, the stock has been witnessing a favorable trend in estimate revisions lately, indicating analysts’ expectation of a better earnings picture.

Some better-ranked stocks in the finance space worth considering include Carolina Financial Corporation CARO, UBS Group AG UBS and BlackRock, Inc. BLK.

Carolina Financial witnessed a 2.3% upward revision in the Zacks Consensus Estimate for the current year in the last 60 days. Its share price has increased 72.3% in the last one year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

UBS Group’s shares have gained 32.6% in the last one year and its Zacks Consensus Estimate for the current year was revised 5% upward in the last 60 days. It also sports a Zacks Rank #1.

BlackRock currently carries a Zacks Rank #2 (Buy). Its Zacks Consensus Estimate has been  revised marginally upward for the current year in the last 60 days. Its share price increased 34.4% in the last one year.

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