(Bloomberg) -- Central Pacific Financial Corp. is in talks to raise money from some well-known alternative asset managers to help buy rival American Savings Bank FSB from Hawaiian Electric Industries Inc., the utility owner grappling with huge losses in the aftermath of last year’s wildfires on Maui, according to people familiar with the matter.
Central Pacific is discussing raising $1 billion to help facilitate the deal from investors including Warburg Pincus, Centerbridge Partners and Atlas Merchant Capital, said the people, who asked to not be identified because the details aren’t public. The money would provide capital to the combined entity.
An agreement could be announced within weeks, the people said. A final agreement hasn’t been reached and discussions could still fall through, they added.
Representatives for Central Pacific, Hawaiian Electric and Warburg declined to comment. Spokespeople for Centerbridge and Atlas didn’t immediately respond to requests for comment.
The deal would help shore up Hawaiian Electric’s finances after the utility owner booked massive losses following the fires that killed dozens of people and destroyed the historic town of Lahaina. Hawaiian Electric, which issued a going-concern warning last month, has acknowledged that its downed power lines caused a small fire near the town the morning of the blaze, though firefighters put out that fire before another one started later in the day. It has agreed to pay almost $2 billion as part of a $4 billion tentative settlement to resolve hundreds of lawsuits over the wildfire.
Share Jump
Shares of Hawaiian Electric jumped as much as 13% Monday. The were up 6.3% to $12.35 in New York trading at 3:44 p.m., giving the company a market value of $1.36 billion. Central Pacific gained 2.1% for a market capitalization of $744 million.
The crisis raised questions about the fate of American Savings Bank, the state’s third-biggest bank and the only bank in the country owned by a utility holding company. American Savings Bank said in July that Hawaiian Electric had been conducting a strategic review for the bank, confirming an earlier report in Bloomberg News.
The bank could be valued at $600 million to $800 million, according to Evercore ISI.
Hawaiian Electric’s financial advisers ran a broad sales process but found little interest from potential buyers on the mainland US, as Hawaii is a small market with little growth potential, one of the people said.
The deal requires Central Pacific — Hawaii’s fourth largest bank by deposits — to raise money from private equity because it’s smaller than American Savings and will need cash to help cover unrealized losses in its securities book, which have to be recognized when a bank changes hands.
Honolulu-based Central Pacific had $7.4 billion in assets and 27 branches as of June 30, according to its website.
Banking deals
The deal also marks the latest example of private equity putting money into US banking after a handful of banks failed last year after depositors pulled funds from Silicon Valley Bank, Signature Bank and First Republic Bank. Regional banks New York Community Bancorp Inc. and First Foundation Inc. raised money from private equity earlier this year.
While private equity firms including Warburg Pincus invested heavily in US banking following the 2008 financial crisis, the industry had largely shied away from the sector since then. That began changing about a year ago when a handful of private equity firms bought TIAA’s online bank.
--With assistance from Mark Chediak.
(Updates with share gains in sixth paragraph.)
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