First Horizon, Iberiabank in year's second-biggest bank merger

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First Horizon in Memphis, Tenn., and Iberiabank in Lafayette, La., announced Monday they are merging in the second-biggest bank deal of 2019.

The $43.7 billion-asset First Horizon said in a press release that it will pay stock for the $31.7 billion-asset Iberiabank. The deal would be valued at $3.9 billion, based on the exchange ratio, First Horizon's closing stock price on Friday and shares of Iberiabank stock outstanding on July 31. The deal is expected to close in the second quarter.

Under terms of the deal, which the companies framed as a merger of equals, First Horizon shareholders will own 56% of the combined company. The merged institution will have $75 billion in assets, $57 billion in deposits and $55 billion in loans across 11 states.

The merger “is an exciting milestone and the logical next step in the continued successful transformation of our company,” Bryan Jordan, First Horizon’s chairman and CEO, said in the release.

“Separately, we are both formidable organizations with strong track records, great businesses and talented bankers,” Jordan added. “Together, First Horizon and Iberiabank will create a powerful new company driven by our shared commitment to our customers, communities, shareholders and the employees we serve.”

The companies said the deal will allow them to invest more in advanced technologies and innovation. The combined company will also have a more diverse revenue model and more products for commercial and retail customers.

First Horizon said it expects the deal to be 16% accretive to its 2021 earnings per share and 22% accretive for Iberibank, including the expected impact from the Current Expected Credit Loss standard.

First Horizon plans to cut $170 million in annual noninterest expenses, representing a quarter of Iberiabank's annual operating expenses, by reducing redundant overhead, branches, operations and computer services. The combined company should have an efficiency ratio of 51%.

First Horizon said it expects to incur $440 million in merger-related expenses, which includes $20 million allocated to the Louisiana First Horizon Foundation. It should take the company about two years to earn back the estimated 5% dilution in its tangible book value.

The company will be based in Memphis, with a regional banking headquarters in New Orleans.

Jordan will remain CEO, while Daryl Byrd, Iberiabank’s CEO, will become executive chairman. William Losch III will remain chief financial officer, and Anthony Restel, Iberiabank’s CFO, will become the the company’s chief operating officer.

David Popwell, Susan Springfield and Tammy LoCascio will continue to serve as First Horizon executives. Iberiabank’s Michael Brown, Terry Akins and Beth Ardoin will join the combined company.

The 17-member board will include nine directors from First Horizon and eight from Iberiabank.

The companies have pledged $10 billion to community benefit plans to increase access to financial resources and support for low- and moderate-income communities in the Southeast.

Morgan Stanley and Sullivan & Cromwell advised First Horizon. Keefe, Bruyette & Woods and Simpson Thacher & Bartlett advised Iberiabank.

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