CIBC says it remains “fully committed” to its current US$4-billion takeover offer for U.S. wealth manager PrivateBancorp, as the bank faces mounting pressure to hike its bid.

"We remain fully committed to this transaction and the offer we have on the table, which we continue to believe provides clear strategic benefits and offers stockholders of Private Bank the certainty of a significant cash payment, as well as the opportunity to participate in the future growth and value creation of the combined company," a CIBC spokesperson said in an emailed statement to BNN.

Since CIBC announced the cash and stock deal to buy the Chicago-based bank in June, PrivateBancorp shares have soared about 30 per cent. The surge has occurred amid a rally among U.S. regional bank stocks in the wake of Donald Trump’s election victory.

PrivateBancorp shares closed at US$50.79 on Monday, far surpassing the US$47 bid value when the transaction was announced on June 29. Based on Monday’s closing price, CIBC’s offer is now valued at US$48.77.

A PrivateBancorp spokesperson also told BNN it is "fully committed" to the CIBC transaction. In an emailed statement, the bank said the agreement "provides clear strategic strategic benefits and offers stockholders the certainty of a significant cash payment, as well as the opportunity to participate in the future growth and value creation of the combined company.”

CIBC’s scenario is “extremely rare,” according to one analyst who has covered the financial services sector for more than a decade.

“I have covered this sector for more than a decade now, and I can’t recall a situation where this has occurred,” said Scotiabank financial services analyst Sumit Malhotra in an interview with BNN.

“I’ll say it only half-jokingly, there’s always something interesting with CIBC. Even when the bank is operating well, they seem to keep us on our toes. This is definitely a rare situation, although we can agree there have been a lot of interesting developments in the U.S. as of late.”

SHAREHOLDER BACKLASH

In the past week, two proxy advisory firms, including ISS and Egan Jones, have recommended shareholders vote against the CIBC-PrivateBancorp deal. Glass Lewis, another well-known proxy advisory firm, has also switched its view, arguing that investors would not be well-served by the agreement.

Shareholders in the Chicago-based bank are preparing to vote on the takeover by CIBC this Thursday.

Malhotra said that while CIBC’s purchase was well-timed considering the run-up in U.S. bank stocks afterwards, “sadly its timing for the shareholder vote was not very good.”

“It’s very much a double-edged sword for CIBC. You never want to have to go back to the table and reprice a deal that was announced more than five months ago,” he added.

“Given the renewed optimism around U.S. growth rates, interest rate hikes, the tax situation – you can look at this from CIBC’s perspective, ‘We might have to pay a little more to get it, but … are we willing to let this thing get away?”

ROOM TO HIKE?

Malhotra said he believes CIBC has room to increase its PrivateBancorp bid to about US$52-54 a share.

That may be something CIBC will have to consider. According to a research report from Canaccord Genuity released Monday, the probability of PrivateBancorp shareholders voting against the transaction has increased and CIBC may be forced to sweeten its bid.

Still, raising its Bancorp offer may pay off in the long term for CIBC, according to Canaccord analyst Gabriel Dechaine.

“With a steepening yield curve, potential for stronger U.S. economic growth and the possibility of lower U.S. corporate taxes and a lighter regulatory burden, [CIBC] might generate more upside from [Bancorp] than we initially imagined,” Dechaine said in the report. 

A sweetened offer may still be cheaper than what could happen in the long run, as Dechaine noted the price tag for U.S. regional bank stocks could continue to rise.

When it announced the deal in June, CIBC said the PrivateBancorp acquisition would help it significantly expand its reach in North America. PrivateBancorp has about 1,200 employees and a presence in 12 U.S. markets.