* Says deal to be accretive in 2016
* No significant likelihood of another bank deal - CEO John
* To buy back $500 mln of common stock
* Second-quarter earnings $1.02/share vs est 94 cents
* Shares rise as much as 14 pct
(Adds CEO comment from interview and conference call; updates
By Tanya Agrawal and Neha Dimri
July 22 U.S. small-business lender CIT Group Inc
said it would buy California bank OneWest Bank NA for
$3.4 billion in cash and stock, a deal that will give CIT a more
reliable source of funding.
Shareholders of IMB Holdco LLC, OneWest's parent company
that CIT is acquiring, will get $2 billion in cash and the rest
through the issuance of 31.3 million CIT shares, assuming a
stock price of $44.33, CIT said in a statement.
"The selling shareholders very much wanted to get stock.
They view the stock as undervalued and that there is lot of
appreciation in it," Chief Executive John Thain said in an
The lender also said it would buy back up to $500 million in
common stock, sending its shares up as much as 14 percent in
CIT's stock was up 11 percent at $48.69 by mid-day.
OneWest was created in March 2009 by investors, including
Paulson & Co, JC Flowers & Co, and MSD Capital, a private
investment firm that manages the capital of Michael Dell and his
The firm bought many assets of IndyMac, a mortgage lender
that went bust in 2008 in one of the largest banking failures in
the country. The privately owned bank operates 73 retail
branches in Southern California.
Before the financial crisis, CIT relied heavily on bond
market borrowing to fund its assets, but lost access to that
funding during the crisis. It received $2.3 billion of bailout
money, but still filed for bankruptcy in November 2009.
John Thain, who headed Merrill Lynch before it was sold to
Bank of America Corp at the height of the financial
crisis, was appointed CEO in February 2010 to get CIT back on
track and his efforts seem to be paying off.
Since emerging from bankruptcy in December 2009, CIT has
increased its reliance on deposit funding and has wiped out more
than $30 billion of high-cost debt, reducing its funding costs.
Up to Monday's close, CIT's stock had jumped 42 percent
since Thain's appointment.
The combined company will have assets of $67 billion after
the deal closes. Institutions with assets more than $50 billion
are classified as systemically important financial institution
(SIFI) and subjected to stricter regulatory requirements.
"We've been planning for that for the last several years and
we believe that we're well positioned to satisfy all of the
criteria of being a SIFI institution," Thain said on a
post-earnings conference call.
Thain said the regulatory approval for the deal will take
about nine months and that there is no significant likelihood of
another bank deal. He also expects more than half of CIT's
assets to be funded by deposits, once the transaction is closed.
The purchase of OneWest boosts CIT's lending to middle
market companies, which refers to businesses generating
operating earnings of about $50 million a year.
CIT also posted a better-than-expected profit for the second
quarter, helped by strong gains at its aerospace and railcar
Financing and leasing assets at its aerospace business rose
13 percent to $10.54 billion during the quarter, while overall
railcar leasing assets jumped about 33 percent to $5.72 billion.
J.P. Morgan was CIT's financial adviser on the deal, while
Goldman Sachs, Bank of America Merrill Lynch and Cleary,
Gottlieb, Steen & Hamilton LLP were advising IMB Holdco.
(Editing by Rodney Joyce and Saumyadeb Chakrabarty)