CHICAGO — Eager to capture a larger share of the Chicago area’s business banking market, MB Financial Inc. announced Friday that it plans to merge with hometown rival MidCity Financial Corp. in a deal valued at $292 million.

The deal, billed as a merger of equals, would create the third-largest banking company based in Chicago, with $3.3 billion of assets and 32 Chicago-area branches. Though the new company, which would keep the MB Financial name, would not have nearly the market share of such giants as Bank One Corp. or Northern Trust Co., it would instantly overtake rivals Corus Bankshares Inc. and Cole Taylor Bank in the middle tier of the crowded Chicago market.

The new company will be “in an extraordinary position to be the premier business bank in Chicago,” said Mitchell Feiger, president and chief executive officer of MB Financial.

The transaction is expected to close in the third or fourth quarter.

MB Financial shareholders applauded the deal. In heavy trading Friday, the stock closed at $19, up more than 15% for the day.

Daniel E. Cardenas, an analyst at Howe Barnes Investments in Chicago, said the deal would make the new MB Financial “a more meaningful player” in the competitive Chicago market. At that size, he added, the new company would be “a likely candidate for acquisition” as well.

MB Financial, with $1.5 billion of assets, is the parent company of Manufacturers Bank. MidCity, with $1.8 billion of assets, is the holding company for Mid-City National Bank of Chicago, First National Bank of Morton Grove, and First National Bank of Elmhurst. The four banks are to be combined into a single Illinois-chartered bank, but the name has yet to be determined.

MidCity, a privately held company that also owns community banks in Texas and Oklahoma, has been in the market for a merger partner. Ken Skopec, president of MidCity, said that the company hired investment bankers 18 months ago to explore its strategic options.

Mr. Feiger would become president and CEO of the new company. Mr. Skopec said MidCity has been looking for someone to succeed him, which averted the usual merger battle over who gets to be chief executive officer.

There is no overlap between the branches of the two banks, so none will be closed. Though the companies expect some jobs to be eliminated, Mr. Skopec said he expects attrition to account for most of the reductions.

MB Financial also expects growth through MidCity’s wealth management divisions. Mr. Feiger said MB Financial has wanted to get into the wealth management business but found building its own unit too expensive and was uneasy with any partners it tried to find. Under terms of the agreement, MB Financial stockholders would get one share of common stock in the new company for each share of MB Financial they hold. MidCity stockholders would get 230.32955 shares of stock for each share they hold, based on MB Financial’s April 19 closing price of $16.50.

Kenneth F. Puglisi, an analyst at Sandler, O’Neill & Partners, which represented MB Financial, said he thought the deal would help MB Financial’s stock price, which he said has suffered since MB Financial bought $500 million-asset Avondale Federal Savings Bank in February 1999.

Avondale had a number of high-risk credits, which Mr. Feiger said are moving out of MB’s portfolio.

The deal surprised at least one industry observer.

“I would have thought [MidCity] would have looked for a bigger, more liquid buyer,” said Christopher R. Raffo, an Arlington Heights, Ill., institutional salesman for Hoefer & Arnett in San Francisco. “The upper ownership are fairly senior guys. Most of the time, their preference is to take a fairly senior, liquid bank.”

Still, Mr. Raffo said the move was a good one for MB Financial, whose last two deals have involved thrifts. Its acquisition of FSL Holdings Inc., a thrift company in South Holland, Ill., is expected to close this quarter. “Picking up thrift banks in general, at least in the near term, does not contribute to a high-performance image,” he said.

Though the Chicago market is widely regarded as overbanked, Mr. Puglisi said he does not expect the deal to trigger a wave of consolidation. “It’s a strange market because there are some large banks at the top that control a big chunk of the market and then a lot of little banks,” he said. He added that he did not expect MB Financial to make more acquisitions in the near term.

Mr. Feiger, who said that acquisitions had sped the company’s growth, also said MB Financial would wait to complete the current deals before thinking about any more. However, he added that if a good deal came along, the company would not let an opportunity slip by.

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