First Citizens to buy CIT for $2.2 billion
First Citizens BancShares in Raleigh, N.C., and CIT Group in New York announced an agreement to merge Friday, creating what would become the country’s 19th-largest bank holding company with roughly $110 billion of assets and a branch network stretching from coast to coast.
The deal would combine two of the industry’s most acquisitive companies in recent years. First Citizens, the parent of First Citizens Bank & Trust, has acquired more than 25 community banks over the past decade and now has $48 billion of assets and 550 branches in 19 states.
CIT, meanwhile, bought the $23 billion-asset OneWest Bank in Pasadena, Calif., in 2015 and earlier this year acquired the $8.3 billion-asset Mutual of Omaha Bank. The two deals have helped to accelerate CIT’s transition from a commercial finance company to a more traditional commercial bank. The company now has $61.7 billion of assets and 92 branches in California and seven other states.
The deal is being billed as a merger of equals, though First Citizens would be the surviving company and its investors would own 61% of its outstanding shares, the companies said in a news release. First Citizens would pay nearly $2.2 billion in stock for CIT, with CIT shareholders receiving 0.062 shares of First Citizens' stock for each share they own.
First Citizens’ Chairman and CEO, Frank Holding Jr., would become chairman and CEO of the combined company, and CIT’s chairwoman and CEO, Ellen Alemany, would become vice chairwoman. The company would have 14 directors, 11 from First Citizens and three from CIT, including Alemany.
First Citizens would retain its name and corporate headquarters. The deal is expected to close in the first half of 2021.
"Frank and I have long respected each other's companies and believe this transaction will accelerate our strategic goals by bringing together the expertise of both banks to create scale, strength and value,” Alemany said in the release.
“I'm proud of the work we have done to transform CIT in recent years to a leading, national commercial bank," Alemany added. "This transaction will build on those efforts and more fully unlock the potential in our core franchises. In addition, the strength that is created as a larger U.S. bank will enable greater opportunities for our team, our customers and our communities."
First Citizens expects to incur $448 million in merger-related expenses. It plans to cut $250 million in annual expenses, or roughly 10% of the combined company's operating costs. The deal is expected to be accretive to First Citizens' earnings and tangible book value.
First Citizens said its efficiency ratio should decrease from 63.8% to 55% in 2022.
Piper Sandler and Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan advised First Citizens. Keefe, Bruyette & Woods, Morgan Stanley and Sullivan & Cromwell advised CIT.