(Bloomberg) -- PrivateBancorp Inc. postponed a shareholder vote on a takeover by Canadian Imperial Bank of Commerce after proxy-advisory firms and some investors called the $3.96 billion cash-and-stock offer insufficient following a post-election rally of U.S. regional lenders.
“In view of the significant changes to trading market conditions over the past few weeks, we believe it is in the best interests of all of PrivateBancorp's stockholders to have additional time to consider the value and long-term strategic benefits of this transaction,” the Chicago-based bank said Wednesday in a statement.
PrivateBancorp didn't announce a new date for the vote, which was scheduled for Thursday.
Glazer Capital and Westchester Capital Management, as well as advisory firms Institutional Shareholder Services, Egan-Jones Ratings Co. and Glass Lewis & Co. have urged shareholders to reject CIBC's offer. Shares of PrivateBancorp have surged as high as $52.98, above the CIBC offer of about $49 a share.
Arbitrage Traders
CIBC anticipates the delay will squeeze out hedge fund and merger-arbitrage traders who've acquired PrivateBancorp shares, according to a person familiar with the deal. It also allows more time for equity markets to stabilize and to determine if the rally is due to euphoria over the President-elect Donald Trump's victory or is the “new normal,” said the person, who asked not to be identified discussing strategy.
CIBC “is hoping laws of physics and gravity causes the bank rally to come back to Earth," Sachin Shah, a special situations and merger-arbitrage strategist at Albert Fried & Co., said in a note to investors.
The June 29 merger agreement allows for the deal, which is valid for one year after the announcement date, to be postponed twice, and includes a $150 million breakup fee payable to CIBC under certain conditions, according to a regulatory filing.
PrivateBancorp shares climbed 0.3 percent to $52.28 at 9:45 a.m. in New York, giving it a market value of $4.18 billion. CIBC gained 0.4 percent to C$109.87 in Toronto.
Toronto-based CIBC is pursing the deal to expand its commercial lending business in the U.S. and leverage its existing wealth-management platform in the country. PrivateBancorp, with about $19 billion in assets, serves largely middle-market companies, business owners and wealthy families.
“We remain committed to this transaction on the agreed terms, which were established by both companies based on our analysis of the fundamental, long-term merits of the combination,” CIBC Chief Executive Officer Victor Dodig said Wednesday in a separate statement.
--With assistance from Scott Deveau To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net. To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net, David Scanlan at dscanlan@bloomberg.net, Steven Crabill, Dan Kraut
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