Chemical Financial in Midland, Mich., has agreed to buy Talmer Bancorp in Troy, Mich.
The $9.2 billion-asset Chemical said in a press release Tuesday that it will pay $1.1 billion, or $15.64 a share, in cash and stock for the $6.6 billion-asset Talmer. The deal is expected to close in the second half of this year.
Chemical said the deal will create the biggest bank based in Michigan. It will also allow Chemical to jump across $10 billion in assets, where it will face enhanced regulatory scrutiny.
Chemical said it expects the deal to be 8% accretive to its earnings per share in the first full year, excluding merger-related costs. It should take the company about three years to earn back any dilution to its own tangible book value.
David B. Ramaker will remain Chemical's president and chief executive, while David Provost, Talmer's president and CEO, will join the company's board. Gary Torgow, Talmer's chairman, will have the same role at Chemical.
Chemical said it expects to cut annual expenses by about $52 million, or 26% of Talmer’s noninterest expenses. Merger-related expenses are expected to total $62 million.
The company said it expects to lose about $5 million in pretax revenue next year tied to interchange fee caps that kick in when it hits $10 million in assets; lost revenue should double to $10 billion in 2018. Chemical also said it expects to incur $2 million in annual pretax costs “to comply with advanced supervisory requirements” such as stress testing and Federal Deposit Insurance Corp. insurance.
"This is clearly a transformational merger between two healthy Michigan banks with complementary geographies," Ramaker said in the release. "We have been impressed by what … the Talmer team has accomplished in a relatively short period of time."
Talmer took advantage of private equity backing from W.L. Ross & Co. in 2010 to buy banks in the wake of the financial crisis before going public in 2014.
Chemical was advised by Sandler O'Neill and Warner Norcross & Judd. Talmer was advised by Keefe, Bruyette & Woods and Nelson Mullins Riley & Scarborough.