First Horizon National in Memphis, Tenn., has agreed to buy Capital Bank Financial in Charlotte, N.C.
The $29.6 billion-asset First Horizon said in a press release Thursday that it will pay $2.2 billion in cash and stock for the $10.1 billion-asset Capital. The deal, which would be one of the two largest bank mergers announced this year, is expected to close in the fourth quarter.
The deal prices Capital at about 200% of its tangible book value.
First Horizon will have more than 300 branches in Tennessee, North Carolina, South Carolina, Virginia and Florida when the deal closes.
Branches in Tennessee will keep the First Tennessee name; locations elsewhere will be known as Capital Bank.
“This is an exciting time for First Horizon,” Bryan Jordan, First Horizon’s chairman and CEO, said in the release. “This partnership will help us more quickly achieve our critical bonefish financial targets.”
Those long-term targets include a 15% return on equity, return on assets ranging from 1.1% to 1.3% and an efficiency ratio of 60% to 65%.
First Horizon said it expects the deal to be 8% accretive to its earnings per share in 2019. It plans to cut about 30% of Capital's annual expenses, or $65 million, including branch closings. It should take less than five years to earn back the deal's expected 9.5% dilution to First Horizon's tangible book value.
First Horizon expects to incur $120 million of merger-related charges.
Capital began as North American Financial Holdings, a entity formed in 2009 with $900 million in capital to buy struggling banks. Backed by the private-equity firms Crestview Partners, Oak Hill Advisors and Falfurrias Capital, the group bought three failed banks and completed five whole-bank deals, including the recent purchase of CommunityOne Bancorp.
Gene Taylor, Capital's CEO, would become First Horizon’s vice chairman.
Barclays Capital, Morgan Stanley and Sullivan & Cromwell advised First Horizon. Sandler O’Neill, UBS and Wachtell, Lipton, Rosen & Katz advised Capital.