U.S. Bank to Buy MUFG Union Bank for $8B
Early Tuesday morning, Minneapolis-based U.S. Bancorp announced that it has an agreement to buy MUFG Union Bank for approximately $8 billion. The deal primarily strengthens U.S. Bank’s footprint in California.
Union Bank is owned by Tokyo-based Mitsubishi UFJ Financial Group Inc. which describes itself as “one of the world’s leading financial groups.” Union Bank has been based in San Francisco.
The deal calls for U.S. Bank to acquire Union Bank for $5.5 billion in cash and approximately $2.5 billion in stock. After the deal closes, MUFG will own a 2.9 percent stake in U.S. Bank. The deal is not expected to close until the first half of 2022.
Union Bank had revenue of $2.9 billion for the 12 months ending on March 31, 2021. Union Bank has 280 branches in California and additional locations in Oregon and Washington state.
The deal brings U.S. Bank 1 million consumer accounts and 190,000 business banking clients.
An electronic presentation that U.S. Bank prepared for a conference call to discuss the transaction noted that the deal brings a “strengthened footprint in attractive growth markets.” U.S. Bank specifically highlighted Los Angeles, San Diego, and the San Francisco Bay Area.
“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…We are also committed to maintaining both organizations’ excellent records of serving low-income communities and supporting minority-led institutions,” said U.S. Bancorp chairman, president, and CEO Andy Cecere in a statement.
Mergers and buyouts typically lead to owners cutting duplicative functions to cut expenses. According to U.S. Bank’s statement: “U.S. Bancorp expects to achieve approximately $900 million in pre-tax cost synergies equal to 40% of estimated non-interest expenses through a combination of real estate consolidation, technology, and systems conversion and other back office efficiencies.”
But U.S. Bank also offered this assurance to Union Bank employees: “Following the closing of the transaction, U.S. Bank is committed to retaining all of MUFG Union Bank’s front-line branch employees.”
A filing from Mitsubishi UFJ Financial Group offered this explanation for why the company wanted to sell its regional banking operations:
“MUFG has viewed the U.S. regional banking business as an important business for the group’s strategy. At the same time, given MUB’s current business environment, including the need for increased technology investments as part of digital transformation, a certain scale is required to maintain and strengthen competitiveness. Under these circumstances, MUFG concluded that transferring MUB to [U.S. Bank] , a major U.S. bank with a strong business foundation, is the most appropriate decision that will lead to providing higher quality financial services to customers and communities and unlock MUB’s potential franchise value.”
The deal does not include MUFG Union Bank’s Global Corporate & Investment Bank and other assets.
U.S. Bank’s purchase is the latest in a long line of bank mergers and acquisitions this year. In June, for instance, Huntington Bank completed its $6 billion acquisition of TCF Financial Corp. According to MarketWatch, bank mergers this year are “cresting at their highest level since the global financial crisis” in 2007.