BOK Financial to buy peer CoBiz in $1 billion deal

(Reuters) - BOK Financial Corp BOKF.O said on Monday it would buy smaller peer CoBiz Financial Inc COBZ.O in a cash-and-stock deal valued at about $1 billion to expand in Arizona and Colorado.

The transaction provides further evidence of increased mergers and acquisitions activity within the U.S. banking sector, in particular among mid-sized lenders, as regulatory changes and corporate tax reductions fuel dealmaking.

CoBiz is the second bank in Colorado to be bought in the last month after Texas’ Independent Bank Group agreed to acquire Guaranty Bancorp, also for around $1 billion.

“The economic growth, in Colorado in general, is very positive at the moment,” Steve Bradshaw, chief executive officer of BOK Financial, told Reuters. He also noted the scarcity of successful Colorado banks in the $2-5 billion of assets range.

Both Tulsa, Oklahoma-headquartered BOK and Denver-based CoBiz provide a range of banking services such as commercial banking, real estate, private banking and treasury management. CoBiz also offers property and casualty insurance.

When adding CoBiz’s $3.8 billion of assets, the combined entity will have assets worth close to $37 billion, with BOK Financial increasing its deposits market share in both Colorado and Arizona from 17th to 7th and 11th respectively, according to a management presentation.

BOK Financial is paying approximately $23.02 per CoBiz share, a marginal premium to its closing price on Friday, with 75 percent of the purchase covered by stock.

Shares of BOK fell 5.4 percent and analysts attributed the decline to the dilution in BOK’s tangible book value - a measure of a company’s value based solely on its tangible assets - as a result of the acquisition. CoBiz’s stock dipped 0.9 percent.

“The price paid (by BOK) equates to roughly 9 percent (tangible book value per share) dilution, which are large numbers and likely on the higher side of what the market would like to see,” said KBW analyst Brady Gailey.

BOK’s Chief Financial Officer, Steven Nell, told Reuters the 9 percent earnings accretion by 2020 which the deal would generate, the improvements to its return on both equity and assets, and cost savings - estimated at $60 million before tax - outweighed the draw on capital.

Industry figures and investment bankers have forecast more dealmaking after legislative changes - passed last month - withdrew heightened regulatory requirements on small and mid-sized lenders.

Goldman Sachs was BOK’s financial adviser, while BofA Merrill Lynch advised CoBiz.

Reporting by Aparajita Saxena and Diptendu Lahiri in Bengaluru and David French in New York; editing by Sweta Singh and Grant McCool