Cal Republic Exits with an IRR of 15.8%
In April 2016, California Republic Bancorp (“Cal Republic”) announced that it would be acquired by Mechanics Bank for $37.19 per share in an all cash transaction. The announcement comes less than nine years after California Republic Bank was started.
The deal, which is expected to close in the 4th quarter of 2016, was priced attractively at 1.94x tangible book value and nearly 24.0x earnings.1 The bank’s initial investors will receive 3.72x their initial investment and will have achieved an IRR of 15.8%2 over the nine year holding period, despite having invested near the onset of the financial crisis of 2008-2009.
Cal Republic had grown to more than $1.75 billion in assets as of March 31, 2016. It created a niche business line focused on selling auto loans and maintaining the servicing rights of the sold auto loans. This created high levels of recurring noninterest income which produced strong earnings. At the time of the deal announcement, Cal Republic had an auto loan servicing portfolio totaling $2.7 billion.3
1Source: SNL Financial
2Assumes a $10.00 price paid on 12/5/2007 and an exit price of $37.19 on 11/15/2016.
3Source: Company’s 3/31/2016 Earnings Release
Note: Carpenter & Company assisted California Republic Bank during its organizational period
