What happened

Shares of New Jersey-based Investors Bancorp (NASDAQ: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 (NYSE:CFG), 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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.