Shares of the $13 billion asset Great Western Bancorp (NYSE:GWB) traded more than 14% higher as of 12:08 p.m. EDT after the bank announced that it plans to be acquired by First Interstate Bancsystem (NASDAQ:FIBK).
First Interstate, based in Billings, Montana, intends to purchase Great Western, which is based in South Dakota, in an all-stock deal valued at roughly $2 billion, or $35.65 per Great Western share. That values Great Western at roughly 170% tangible book value, which is a bank's equity minus its goodwill and intangible assets, and a measure of what the bank would be worth if it were to be immediately liquidated.
The deal will grow First Interstate to $32 billion in assets and expand the bank's presence in Sioux Falls, South Dakota; Omaha, Nebraska; and Des Moines, Iowa.
First Interstate also plans to cut 21% of Great Western's noninterest expenses base, or roughly $56 million, which it expects to achieve fully by 2023.
First Interstate traded nearly 6% down as of 12:08 p.m. EDT, but the deal looks fairly compelling on paper. The addition of Great Western is expected to immediately grow First Interstate's tangible book value per share, and is also expected to grow First Interstate's earnings per share by 20% in 2023. The deal is expected to close in the first quarter of 2022.