The $49-billion asset First Citizens BancShares (NASDAQ:FCNCA) is merging with the $61-billion asset CIT Group (NYSE:CIT) in an all-stock deal that will create the 19th largest bank in the U.S., it was announced today.
The combined company will be headquartered in Raleigh, North Carolina, and have a significant presence in New York; New Jersey; Pasadena, California; Omaha, Nebraska; Phoenix; Jacksonville, Florida; and Columbia, South Carolina, among other locations.
As part of the deal, CIT shareholders will get 0.0620 shares of First Citizens Class A common stock for each of their CIT common shares. At the end of the transaction, First Citizens shareholder will own roughly 61% of the combined entity, while CIT stockholders will own roughly 39%.
The new entity will operate under the First Citizens brand and trade under the ticker FCNCA on the Nasdaq.
First Citizens CEO Frank Holding Jr. will lead the combined company, while CIT CEO Ellen R. Alemany will become vice chairwoman and serve on the board of directors.
"This is a transformational partnership for First Citizens and CIT designed to create long-term value for all of our constituents, including our stockholders, our customers, our associates and our communities," Holding said in a statement.
Although CIT is the bigger bank and this is more of a merger of equals, First Citizens looks more like the buyer here because it's trading at about 104% tangible book value, while CIT is trading at about 40% of tangible book value, making First Citizens' currency more valuable.
At the exchange rate in the deal, CIT shareholders are swapping their shares for an implied value of $21.91 per share, or a roughly 11% premium over the closing price of the stock on Thursday.
The deal is expected to increase earnings per share of the combined company by 50% once costs savings of 10% are realized, and when the deal closes, tangible book value accretion is expected to be more than 30%.
Shares of CIT jumped by more than 20% this morning, while shares of First Citizens rose by more than 8% right off the bat.