To tighten its grip on the Chicago-area market, Bank of Montreal said Friday that it will acquire First National Bank of Joliet, Ill., for about $220 million and merge it into its own Chicago-based Harris Bank.
The deal, which is expected to close in August, will bring Harris closer to its goal of being the top full-service bank in the market, said Chuck Tonge, its executive vice president of community banking.
Harris has been adding to its community bank network in Chicago since 1994. It ranks third, behind Bank One Corp. and ABN Amro, in market share for both Chicago and all of Illinois.
First National would bring Harris $1.1 billion of assets and 18 branches, boosting its branch total in the market to about 150.
The geographic distributions of their locations were a good fit for Harris, with no overlap between the two banks branches, Mr. Tonge said. That means no layoffs would be associated with the transaction, he said.
The Joliet, Ill., bank was at a point where it had to offer additional products and increase its lending capabilities to attract and keep clients.
So the timing of the deal worked out well from First Nationals perspective, said Albert DOttavio, its president and chief operating officer. First National shareholders would receive $72.50 in Bank of Montreal stock, cash, or both for each share of First National common stock.
Once the deal closes, First National would be renamed Harris Bank Joliet.
Other banking companies have also recently pegged Chicago as an appealing market. Charter One Financial Corp. of Cleveland acquired Alliance Bancorp, which is based in the Chicago suburb of Hinsdale, in January. Fifth Third Bancorp of Cincinnati announced plans in November to buy Old Kent Financial Corp. of Grand Rapids, Mich., which also has a substantial presence in Chicago.
Analysts on Friday described the First National Bank deal as straightforward and relatively small compared to Harris Banks overall size. However, Goldman Sachs analyst Heather Wolf Mattes said she was surprised that the deal was oriented to retail banking rather than wealth management a big part of the Harris business strategy.
Just over a year ago, Harris expanded its wealth management business to attract so-called emerging affluent investors, by lowering its minimum of investable assets, and has acquired a number of wealth management operations in Illinois, Arizona, Washington, and Florida.
According to Mr. Tonge, Harris will continue to look at acquisition opportunities in the future, although no time frame has been established.
Ms. Wolf Mattes expects that future acquisitions by the bank would build out its wealth management operations, rather than its community banking operations.