Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Investors Bancorp Rose Today

By Bram Berkowitz – Jul 28, 2021 at 3:52PM

Key Points

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The New Jersey-based bank is being acquired.

What happened

Shares of New Jersey-based Investors Bancorp (ISBC) rose by 10.5% Wednesday after the roughly $27 billion asset bank announced that it's being acquired by the much larger Citizens Financial Group (CFG 2.44%), a roughly $185 billion asset bank based in Rhode Island.

So what

Citizens will pay $14.63 per share to buy Investors -- 90% in stock and 10% in cash. Seeing as Investors closed Tuesday trading at $13.02 per share, that price represents a 12.4% premium. It also values Investors at roughly 130% of its tangible book value (TBV) -- i.e., the value of its physical assets, or what the bank would be worth if it were to be immediately liquidated.

"The acquisition of Investors, following on the heels of the acquisition of HSBC's East Coast branches, further strengthens our formidable franchise in the northeast, together adding roughly one million customers and boosting our near and long-term growth potential," Bruce Van Saun, chairman and CEO of Citizens, said in a statement.

Green squiggly line moving upward.

Image source: Getty Images.

Now what

Investors has never been a great bank, which is why it only sold for 130% of TBV -- not a high valuation for a bank stock in today's market. But adding those assets will help Citizens strengthen its market share in metro New York and New Jersey.

As a bigger bank with more lending capabilities and services, Citizens will also be able to cross-sell its products to Investors' customers, and also begin to grow organically in its new markets. Until the deal closes, Investors' stock price will now move in tandem with Citizens' stock.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.