First Busey Corp. and Main Street Trust Inc. have been rivals for years, and their merger of equals would create a dominant banking company in the Champaign-Urbana, Ill., market.
Perhaps more significantly, the merger would usher in a new era of management. Douglas C. Mills would step down after nearly three decades as First Busey's chief executive, handing the reins to a one-time protege, Van A. Dukeman, Main Street's CEO and president.
First Busey, of Urbana, and Main Street, of Champaign, announced a deal Thursday that would create a $4.1 billion-asset company with 45 branches, mostly in central Illinois. That company, which would retain the First Busey Corp. name, would have a deposit share of more than 40% in the Champaign-Urbana market.
The two companies are billing the deal as a merger of equals - the board would be made up of five directors from each - though First Busey is technically the buyer. Main Street shareholders would receive 1.55 shares of First Busey stock for each of their shares. The deal is valued at about $347 million.
Mr. Dukeman said in an interview Thursday that the companies had been talking off and on for 10 years. He and Main Street chairman Gregory B. Lykins worked for Mr. Mills at First Busey for about 10 years, and they have viewed First Busey as a friendly competitor since they left in 1993, he said.
The deal makes sense in part because the companies know each other so well, but also because they believe they could compete better for deposits and loans as a single, larger company, Mr. Dukeman said.
"We felt like we were doing fine individually, but we felt we were stronger together than apart," he said.
First Busey said Mr. Mills was unavailable for comment.
However, he said in a press release, "We expect to build upon our proud histories of shared beliefs, common practices, and the deep respect and close personal relationships that exist among many directors, executives, associates, and customers of both organizations."
The deal is the second this year in which two central Illinois companies have announced they were combining in a merger of equals. In July, Centrue Financial Corp. in Fairview Heights and UnionBancorp Inc. in Ottawa announced that they were teaming up create a $1.3 billion-asset company. The companies said that they said could operate more efficiently together than they could separately.
Barry McCarver, an analyst with Stephens Inc. in Little Rock, said that given the history between First Busey and Main Street, their deal is not a surprise.
He said he believes succession planning factored largely into the decision to merge. Mr. Mills, 66, has run First Busey since it was created as a holding company in 1971. (Its Busey Bank was founded in 1946.)
Mr. Mills would remain the chairman until 2009, when Mr. Lykins, 59, would succeed him.
Mr. Dukeman, 47, would become the CEO of the holding company after the deal closes in April. Lee O'Neill, executive vice president at Busey Bank, would become its president and CEO.
First Busey announced Thursday that P. David Kuhl has resigned as Busey Bank's president and CEO.
Mr. McCarver said that for many Busey investors, Mr. Mills' leadership is what drew them to the company.
"That's going to take some getting used to. It's a big loss for the stock," Mr. McCarver said.
First Busey's stock has been climbing in recent weeks and is trading at close to a 52-week high. It rose 0.54% Thursday, to $22.39 a share.
Main Street's stock soared on news of the deal, closing up 12.5%, at $33.75. a share.
Mr. Dukeman said the company would focus on organic expansion both in its Illinois markets and on the west coast of Florida, where Busey Bank has eight branches.
"Busey has the Florida bank, which is a viable company in a very strong area. We'll continue to press that engine through organic growth and look for affiliations down there," he said.
First Busey and Main Street have the top two deposit shares in the Champaign-Urbana metropolitan statistical area, but they do not have many overlapping branches, Mr. Dukeman said. Still, he acknowledged that there is little room for growth in that market, and he said the company would look to bulk up elsewhere in downstate Illinois.
"We're not in Springfield now, and that is a good market," he said. "If you look at our downstate footprint and what you would called major markets downstate, that's an obvious hole."
