Fifth Third Bancorp in Cincinnati has agreed to buy MB Financial in Chicago.
The $142 billion-asset Fifth Third said in a press release Monday that it will pay $4.7 billion in cash and stock for the $20.2 billion-asset MB Financial. The deal prices MB Financial at 276% of its tangible book value.
It would be the largest bank acquisition since Royal Bank of Canada bought City National in 2015, and the first bank acquisition for Fifth Third since it bought First Charter in Charlotte, N.C., in 2008. Fifth Third recently had its Community Reinvestment Act rating upgraded, which helped pave the way for an acquisition.
MB Financial has 91 branches, $15 billion in deposits and $13.9 billion in loans. Fifth Third said it will hold about 6.5% of Chicago’s deposits once the deal closes, making it the market’s fourth-biggest bank. The company estimated that it would have a 20% share of middle-market relationships in Chicago.
“There were no other potential partners of the same caliber as MB Financial in the Chicago market, and we are very pleased to reach an agreement to merge our companies,” Greg Carmichael, Fifth Third’s chairman, president and CEO, said in the release. “We view MB Financial as a unique partner in our efforts to build scale in this strategically important market.”
Fifth Third plans to cut about 45% of MB Financial’s annual noninterest expense, or roughly $255 million. About $159 million of those cuts will involve compensation, and Fifth Third said it plans to close about a fifth of the combined company’s Chicago branches. About a third of MB Financial’s branches are within one mile of a Fifth Third branch.
The company expects to incur about $300 million in restructuring costs.
The deal is expected to be 2% accretive to Fifth Third’s 2019 earnings per share and 7% accretive the next year, including cost savings. It would allow Fifth Third to raise its guidance for meeting its financial targets.
Fifth Third said the deal should dilute its tangible book value by about 7.7%.
Mitch Fieger, MB Financial’s CEO, will become chairman and CEO of Fifth Third’s Chicago region. Two members of MB Financial’s board will become Fifth Third directors.
Fifth Third said it has invested nearly $2 billion in the Chicago area in the last two years, putting it ahead of targets in its five-year Community Commitment. Fifth Third said it plans to increase its Chicago-area commitment after consulting with its Community Advisory Forum.
Citigroup and Simpson Thacher & Bartlett advised Fifth Third. Sandler O’Neill; Silver Freedman, Taff & Tiernan; and Vedder Price advised MB Financial.