Chemical, TCF to merge, creating $45 billion-asset bank

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Chemical Financial in Detroit and TCF Financial in Wayzata, Minn., have announced a merger of equals that would create a $45 billion-asset institution with $34 billion of deposits and more than 500 branches in nine Midwestern and Western states.

Under terms of the all-stock deal, TCF would be merged into Chemical and the company would operate under the TCF brand name and be headquartered in Detroit. TCF shareholders are to receive roughly half of a Chemical share for each TCF share owned. The deal price is equal to $21.58 per TCF share, for a total deal price of nearly $3.6 billion.

TCF shareholders will own 53.8% of the company. The deal is the biggest by overall value since Fifth Third Bancorp agreed in May to buy MB Financial.

Gary Torgow, the $21.5 billion-asset Chemical's chairman, would become executive chairman and Craig Dahl, the $23.5 billion-asset TCF's chairman, president and CEO, would become president and CEO.

The 16-member board would have an equal number of TCF and Chemical directors.

The acquisition would be Chemical’s sixth since late 2014, when it had less than $7 billion of assets, and first with a company based outside of Michigan. Its last acquisition was in August 2016, when it bought Talmer Bancorp in Troy, Mich.

In a Monday press release, the companies stressed the “complementary” nature of the transaction, saying that it combines Chemical’s community banking and wealth management capabilities with TCF’s large deposit franchise and expertise in wholesale and specialty lending across the U.S.

“The new TCF will have attractive positions in both its product suite and market footprint as well as a more diversified loan portfolio and increased lending capabilities across asset classes, geographies and industry verticals,” Dahl said in the release.

The companies are predicting that within three years of the deal’s closing, the new TCF will produce a roughly 19% return on tangible common equity, a return on assets of roughly 1.6% and a 53% efficiency ratio. They also expect to reduce annual overhead by $180 million by 2020, mostly through the consolidation of back-office functions. They said branch closings would be “minimal,” since there is little branch overlap.

The companies expect to incur $325 million in merger-related charges.

Chemical has 212 branches in Michigan, Indiana and Ohio. TCF has 314 branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, South Dakota and Arizona.

The deal is expected to be 31% accretive to TCF's earnings per share and 17% accretive for Chemical. It should take about three years to earn back an expected 7.9% dilution of tangible book value.

Keefe, Bruyette & Woods; Nelson Mullins Riley & Scarborough; and Wachtell, Lipton, Rosen & Katz advised Chemical. J.P. Morgan Securities, Perkins Advisors, and Simpson Thatcher & Bartlett advised TCF.

The deal is expected to close late in the third quarter or early in the fourth quarter.

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