(Bloomberg) City National's sale to Royal Bank of Canada bestows new wealth on two men who have served as Hollywood’s private bankers since Steven Spielberg filmed "Jaws."
Russell Goldsmith, 64, the Los Angeles-based bank's chief executive officer since 1995, holds shares with a value of $373.8 million at the deal price, according to data compiled by Bloomberg and based on regulatory filings from last year. His father Bram, who ran the bank for two decades before his son, owns shares valued at an additional $308.7 million. A family foundation holds $21.9 million, bringing the combined holdings to about $704 million.
The sale announced Thursday confers wealth to a family that built the 60-year-old bank from its roots of offering personalized service to Hollywood’s elite. The lender provided a $100,000 loan to Frank Sinatra when he needed to pay a ransom after his son was kidnapped in 1963 and lent $4.5 million to Arnold Schwarzenegger to fund his first California gubernatorial campaign in 2003.
RBC agreed to pay $93.80 for each share, or 26% more than Wednesday's closing price, the Toronto-based firm said in a statement. Canada’s second-biggest lender by assets will pay about $47.25 in cash and 0.7489 of a share for each of City National’s shares, valuing the firm at $5.4 billion. The Goldsmiths chose to take RBC stock for their entire holding, the firm said.
The value of Russell Goldsmith’s shares doesn’t include $15.7 million in exercisable options, $8 million in restricted share units and $4 million in options that can’t be exercised, according to the firm’s most recent proxy, which refers to 2013 figures. City National has yet to release the 2014 numbers.
Goldsmith could have been wealthier. He’ll stay on as City National’s CEO and run RBC’s U.S. wealth management business, forgoing a change-in-control payment worth about $24.8 million, according to the firm’s filings with the SEC. The total would include lump sum payments and the sped-up vesting of options and other restricted share units, according to Bloomberg calculations.
David McKay, who took over as RBC’s CEO in August, said he knew of the golden parachute and was confident Goldsmith would remain.
“Russell’s agreed to stay on and to lead this,” McKay, 51, said in a phone interview. “He’s excited about staying, he’s excited about this new opportunity in front of him, and it’s great to bring in that type of talent into our organization.”
City National didn’t make Goldsmith available for an interview, and declined to comment on the share valuations.
Goldsmith and McKay met in 2013, and have been in talks the past year on a transaction RBC codenamed “Laker,” referring to the National Basketball Association team in Los Angeles, McKay said. Initially, it was “pretty clear” that City National wasn’t for sale and yet talks continued to progress, he said.
The deal marks RBC’s biggest takeover and will help the lender expand sales to wealthy U.S. residents.
City National first made inroads into New York about a decade ago with five people in an upstairs Midtown office, Goldsmith said in a 2013 interview with Bloomberg News. The bank set its sights on Broadway, and while it doesn’t finance productions, it has provided payroll and cash-management services for shows, he said. The lender opened street-level branches in the city to gain visibility in a town where many of its Hollywood clients work and live.
Over the years, the lender has branched out from its 1954 founding as the bank to the stars and expanded earlier in the decade to Atlanta and Nashville to target music producers, talent agencies and law firms.