U.S. Bancorp to buy MUFG Union Bank

Minneapolis-based U.S. Bancorp is paying about $8 billion in a cash and stock deal to acquire MUFG Union Bank, San Francisco.

U.S. Bancorp is paying about $5.5 billion in cash for the core regional banking franchise from Japan’s Mitsubishi UFJ Financial Group. The deal, which is expected to close in the first half of 2022, does not include MUFG’s global corporate and investment bank or certain middle and back office functions. The $133 billion MUFG Union has more than 280 offices in California as well as 15 in Washington, two in Oregon and one in Arizona.

The acquisition will bring approximately $58 billion in loans and $90 billion in deposits as well as more than 1 million consumer customers and about 190,000 small business customers on the West Coast. It will bump U.S. Bank’s deposit position in California to 5th from 10th.

“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,” said Andy Cecere, chair, president and CEO of the $559 billion U.S. Bancorp. “With MUFG Union Bank, we will increase access to state-of-the-art financial products while maintaining U.S. Bank’s strong track record of putting its customers and communities first. We are also committed to maintaining both organizations’ excellent records of serving low-income communities and supporting minority-led institutions.”

U.S. Bancorp expects the transaction to be approximately 6 percent accretive to earnings per share in 2023, assuming a 75 percent synergy phase-in, and 8 percent accretive to earnings when fully integrated. The transaction has an estimated internal rate of return of more than 20 percent. The purchase price is estimated at 1.3 times of MUFG Union Bank’s tangible book value, based on the expected capital to be delivered at close. 

U.S. Bancorp expects to achieve approximately $900 million in pre-tax cost synergies equal to 40 percent of estimated non-interest expenses through a combination of real estate consolidation, technology and systems conversion and other back office efficiencies. U.S. Bancorp expects to incur merger charges of $1.2 billion.

“We are very pleased to have reached this agreement which will allow MUFG to focus and increase our resources on accelerating growth in our Americas wholesale businesses – specifically our corporate and investment banking, global markets, Japanese corporate banking and transaction banking businesses,” said Kevin Cronin, MUFG Regional Executive for the Americas and CEO of MUFG Americas Holdings Corporation and MUFG Union Bank, N.A.

MUFG Union Bank is currently operating under a consent order from the Office of the Comptroller of the Currency, issued yesterday over information security and operational risk controls failures. U.S. Bancorp said it “believes it can successfully remediate the issues” and they will not affect its planned growth or operations. 

Goldman Sachs & Co. LLC is serving as exclusive financial advisor and Simpson Thacher & Bartlett LLP is serving as legal advisor to U.S. Bancorp.