Making good on a pledge to build its market share in Indiana, Cincinnati-based Fifth Third Bancorp Monday announced its second acquisition in the Hoosier State in a month-a $228 million stock deal for Peoples Bank Corp. of Indianapolis.
The merger would boost $29.7 billion-asset Fifth Third's presence in Indianapolis to fourth from the No. 6 spot, based on deposits, and dovetail with its pending $2.1 billion deal for CNB Bancshares, a $7.2 billion-asset company based in Evansville, Ind.
"It's a really natural fit," said Robert P. Niehaus, the Fifth Third executive vice president in charge of retail administration. After closing the CNB and Peoples deals, Fifth Third would be the third-largest bank in Indiana.
Fifth Third, an active acquirer known for its strong stock price and efficient operations, has been straightforward about its plans to expand in Indiana.
George A. Schaefer Jr., Fifth Third's president and chief executive officer, has said his company wants to control at least 20% of the deposits in its core markets of Ohio, Kentucky, and Indiana. With the CNB and Peoples deals, it would have a 9% share across those states.
Analysts said the deal for Peoples, which has $650 million of assets, would help strengthen Fifth Third's presence in the growing Indianapolis metropolitan area.
"This is a great market for them to get big in," said Timothy W. Willi, bank analyst with A.G. Edwards & Sons Inc. in St. Louis. "Now they will have a very strong position in a very vibrant market."
By adding Peoples' nine Indianapolis branches to the Fifth Third fold, the Ohio company would have 50 branches in the metropolitan area.
Though a few Indianapolis branches may be closed as a result of the merger, the deal would create no overlap with 145-branch CNB, which does not have offices in Indianapolis.
Chris Bamman, bank analyst with Advest Inc. in New York, said Fifth Third should benefit from the Peoples deal, even though the transaction is not expected to add materially to the company's earnings.
"Fifth Third is very good at integrating companies and getting the most out of what they acquire," he said.
To help foster acquisitions, Fifth Third has been visiting Indiana banks for years to woo their managements-a strategy that paid off with Peoples. Gerald R. Francis, Peoples' president, said executives contacted Fifth Third about a possible sale in early June as Fifth Third was in negotiations to buy CNB.
"It was clear to us they would be a great partner," Mr. Francis said. "They're widely regarded as the best bank in the country with the best currency."
Peoples hoped to receive $75 per share in stock from Fifth Third, Mr. Francis said, but the board was pleased with the final price of $73 per share based on Fifth Third's closing price Friday of $66.97.
Under the terms of the deal-which were hammered out late Sunday evening- Peoples shareholders would receive 1.09 shares of Fifth Third common stock for each outstanding share of Peoples. The pooling-of-interests deal is expected to close in the fourth quarter.
Peoples, the parent of Peoples Bank and Trust Co., would be integrated into Fifth Third's Indiana bank. James G. Giancola, CNB's chief executive officer, would head the combined Indiana operations.
Fifth Third is still working out a role for some members of Indianapolis' McWhirter family, who together control about 40% of Peoples shares. William E. McWhirter, Peoples' chairman and chief executive officer, may be nominated to the combined Indiana bank's board of directors, Mr. Niehaus said.
Though an undisclosed number of jobs may be eliminated in Indianapolis, Fifth Third confirmed Monday that it is hiring closer to home. The company plans to add 700 positions at a new document and accounts processing center it is establishing in Cincinnati.
The processing center, which is to be located in a building formerly occupied by U.S. Shoe-Nine West, is needed to handle transactions and paperwork generated by 465,000 new customers that Fifth Third has picked up through acquisitions in the past year.
A spokeswoman for Fifth Third said the tight labor market in Cincinnati may make it tough to fill all of the openings.
With most bank stocks falling Monday, Fifth Third shares were off 40.625 cents, to $66.5625, on news of the deal.