The $120 billion asset Huntington Bancshares (HBAN 1.71%), based in Columbus, Ohio, has announced a definitive agreement to acquire the $48 billion asset TCF Financial (TCF +0.00%), based in Detroit, Michigan.
The transaction will create a top 10 bank in the U.S. and will give Huntington a top five deposit market share in 70% of the metropolitan statistical areas it operates in.
The deal will be an all-stock transaction for an estimated $6 billion, valuing shares of TCF Financial at $38.83 per share, nearly 12% higher from TCF's close on Friday. The deal also values TCF, on the whole, at 150% tangible book value.
Huntington expects the purchase to dilute the pro forma bank's tangible book value by 7% initially, with an earn-back period of 2.7 years. Huntington also expects the deal to be accretive to earnings per share by 18% in 2022 and result in a 20% internal rate of return.
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"This merger combines the best of both companies and provides the scale and resources to drive increased long‐term shareholder value," Stephen D. Steinour, president, chairman, and CEO of Huntington Banchsares, said in a statement .
Following the deal, Steinour will remain as president, CEO, and chairman of the combined holding company as well as CEO of the bank subsidiary. TCF's Executive Chairman Gary Torgow will become chairman of the combined entity's board of directors.
As Huntington works through the deal, it plans to cut 37% of TCF's non-interest expense base, invest $150 million in technology at the combined entity over the next three years, and take $880 million in one-time, pre-merger expenses.
The deal marks a continued wave of regional bank consolidation after First Citizens Banchsares purchased CIT in October, and PNC purchased the U.S. operations of the Spanish lender BBVA in November.
According to Robinhood, shares of TCF were up more than 10% in pre-market trading, while shares of Huntington were down slightly.
