Why Taylor Capital Shares Skyrocketed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Taylor Capital (NASDAQ: TAYC  ) , the holding company of Cole Taylor Bank, a commercial and consumer lending and financial services company located in the Chicago area, skyrocketed as much as 22% after agreeing to be purchased by MB Financial (NASDAQ: MBFI  ) .

So what: Under the terms of the deal and as of Friday's closing value, MB Financial is offering $22 per share, close to $680 million, for Taylor Capital. MB Financial plans to finance the deal with a mixture of cash and stock -- $4.08 in cash and 0.64318 shares of MB Financial for each share of Taylor Capital. The acquisition by MB Financial is expected to boost the bank into the top-five market share for Cook County in Illinois and is forecast to be immediately accretive to earnings. MB Financial noted the deal would close sometime in the first half of 2014.

Now what: The deal is pretty straightforward in many respects and looks like a win-win for both parties involved. There is a bit of uncertainty for Taylor Capital shareholders in that a good chunk of the deal is being financed with MB Financial shares, so any fall there will negatively impact the purchase price. However, I continue to feel that no sector offers a better pathway for consolidation than regional banks -- evidenced by the deal we're seeing today between Taylor Capital and MB Financial. Expect to see more deals like this if U.S. economic growth continues along at this slow but steady pace.

With so much of the financial industry getting bad press these days, it may be a greedy when others are fearful moment. However, many banks are on the mend, and, not surprisingly, some of Warren Buffett's biggest investments are in the space. In the Motley Fool's free report, "The Stocks Only the Smartest Investors Are Buying," you can learn about a small, under-the-radar bank that's too tiny for Buffett's billions. Too bad, because it has better operating metrics than his favorites. Just click here to keep reading.


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