Union Bank of California has agreed to buy Pacific Capital Bancorp, a smaller California-based bank part-owned by billionaire Gerald J Ford, in the biggest industry deal so far this year.

The holding company for Union Bank of California said on Monday that it would pay $1.5bn in cash for Pacific Capital – or $46 per share. The offer is at a 60 per cent premium to Friday’s $28.69 closing price.

Union Bank is owned by Bank of Tokyo’s Mitsubishi UFJ Financial Group, the Japanese lender that invested $9bn in Morgan Stanley in 2008. Mitsubishi UFJ has been scouring the US market for potential acquisitions to boost overseas income, adding all of Union Bank to its portfolio in 2008.

California and its vast network of independent banks is expected to provide fertile ground for financial mergers and acquisitions. “There are certainly a lot of banks out here,” said John Woods, Union Bank’s chief financial officer. “There’s a lot of activity, a lot of banks looking at other banks, a lot of discussions.”

Pacific Capital returned to profitability in 2011, reporting $71m of net income after three years of losses. The bank will come with so-called deferred tax assets which Union Bank can now use.

Shares of Santa Barbara-based Pacific Capital jumped to $56.90 in early morning trading on Monday.

Mr Ford owns about 75 per cent of outstanding Pacific Capital stock after injecting $500m into the bank in 2010. Mr Ford made his name snapping up troubled lenders after earlier financial crises, such as the savings and loan crisis of the 1980s , and selling them at a later date.

Combined, Union Bank and Pacific Capital will become the fourth-biggest bank in California by market share after Wells Fargo, JPMorgan and Bank of America, which holds the top spot.

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