Diversified financial services company FirstMerit Corp. (FMER) agreed Thursday to acquire smaller rival Citizens Republic Bancorp, Inc. (CRBC) in an all-stock deal valued at about $22.50 per share or $912 million. The deal, which has the unanimous approval of the boards of both companies, is expected to close in the second quarter of 2013.
However, the closure of the deal will primarily be subject to approval by both companies' shareholders and regulatory approvals.
The proposed deal will create a premier midwest banking franchise with operations across the five contiguous states of Pennsylvania, Ohio, Michigan, Illinois, and Wisconsin. It will have total assets of $24 million, loans of $15 billion and $19 billion in deposits.
The deal will also strengthen Akron, Ohio-based FirstMerit's presence in Northeast Ohio and help expand its operations into Michigan and Wisconsin. The combined entity will have a total of 415 branches, 452 ATMs and more than 5,000 employees.
"With a five-state reach that will extend from Western Pennsylvania to Wisconsin, FirstMerit looks to become the bank of choice among businesses and individuals across the upper Midwest. As we have successfully demonstrated with our new customers in Chicago, we will provide a seamless transition of existing Citizens Republic relationships," FirstMerit Chairman, President and CEO Paul Greig said in a statement.
The deal will see Citizens' shareholders receive a fixed 1.37 shares of FirstMerit common stock in exchange for each share of Citizens' common stock. The offer is valued at $22.50 per share, based on FirstMerit's average ten-day closing stock price ended Wednesday of $16.43.
The offer value represents a 13 percent premium to Citizens Republic's closing stock price of $19.87 on Wednesday. The deal is expected to be 7.5 percent accretive to FirstMerit's earnings in 2014, and lead to net cost savings of $59 million on a pre-tax basis.
"The Citizens Board and management team believe that combining with FirstMerit will deliver significant value for our shareholders, while allowing them to participate in the tremendous upside potential of a stronger bank with increased scale," Citizens' president and CEO Cathleen Nash stated.
Following the closure of the deal, Citizens will be rebranded to the FirstMerit name, and Greig will continue as chairman, president and CEO of the combined entity. Meanwhile, FirstMerit will appoint two Citizens board members to its board of directors.
Greg has extensive experience in Wisconsin as he president and CEO of the Wisconsin market for Bank One and Chase from 1999 to 2005.
Additionally, FirstMerit noted that it expects to repay about $345 million of Citizens' TARP preferred stock, which includes $45 million of estimated deferred dividends, held by the U.S. Treasury at closing of the merger after receipt of requisite approvals.
RBC Capital Markets acted as exclusive financial advisor to FirstMerit in the deal.
In Thursday's regular trading session, FMER is currently trading at $15.85, down $1.31 or 7.63% on a volume of 0.41 million shares, while CRBC is trading at $20.77, up $0.90 or 4.53% on a volume of 0.21 million shares.
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