ISS again recommends ‘no’ vote on CIBC-PrivateBancorp deal – Finance News

on May7

6 May 2017 | 8:36 pm

A second increase in CIBC’s bid for Chicago’s PrivateBancorp isn’t enough to change a high-profile proxy advisory firm’s recommendation that Private’s shareholders vote against the deal this coming week.

In a special note issued today, Institutional Shareholder Services said investors still aren’t getting the premium they deserve in light of the potential for tax and regulatory relief from Washington, D.C.

The recommendation is a significant blow given that CIBC has said its revised offer of May 4 was its last and best. The Toronto-based bank added $3 per share in cash to a cash-and-stock offer that totaled $60.43 per share after the increase. PrivateBancorp earlier had advised CIBC it didn’t think its shareholders would approve anything less than $60 per share.

Shareholders are scheduled to vote May 12. If there isn’t enough support, CIBC could move to postpone the vote, but shareholder approval has to take place by the end of June under the merger agreement or the deal is off.

Both boards voted unanimously for the sweetened bid.

Now bedeviling what has become one of the more star-crossed bank deals in recent memory are worrisome questions about the health of Canada’s housing market. The meltdown of Canadian mortgage lender Home Capital has hit Canadian bank stocks in recent weeks. With 55 percent of CIBC’s price for PrivateBancorp in the form of stock, PrivateBancorp shareholders would be taking on exposure to the Toronto housing bubble, which has cast a shadow over Canada’s economy.

“Should investor concern about Canadian real estate heighten, CIBC’s stock could decline more than its peers, as CIBC is smaller than its four main competitors in Canada and its exposure to Canadian residential mortgages (including home-equity lines of credit) appears proportionally greater than the exposure faced by any of those four peers,” ISS wrote in its report.

“These negative uncertainties in Canada contrast with positive uncertainties in the U.S.: potential tax and regulatory improvements for banks,” ISS added.

CIBC’s stock fell $1.51 per share May 4 after it announced its latest bid, eroding the value of the offer below $60. But CIBC recovered all but a penny of that yesterday.

CIBC’s stock performance early this coming week may well determine whether PrivateBancorp CEO Larry Richman and his board get their deal.



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