Hancock Holding Co. has agreed buy fellow Gulf Coast bank Whitney Holding Corp. in a nearly $1.5 billion all-stock deal.
Shares of Whitney surged 29% to $13.99 just after the market opened, while Hancock fell 7% to $34.42.
Hancock expects to repurchase all of Whitney's Trouble Asset Relief Program preferred stock and warrants held by the Treasury at closing. Whitney, which has suffered amid credit-quality woes, received some $300 million of aid.
The deal comes as merger activity in the banking space has started to pick up in the past several months, two years after the financial crisis brought the sector to its knees.
Under the terms of the transaction, which was approved by both companies' board of directors, shareholders of New Orleans-based bank Whitney will receive 0.418 share of Hancock for each share of Whitney. That values Whitney at $15.48, a 42% premium to Tuesday's closing price.
Upon completion of the transaction, which is expected in the second quarter, the combined company will have about $20 billion in total assets, $16 billion in deposits, $12 billion in loans, and 305 branches in Texas, Louisiana, Mississippi, Alabama and Florida.
The deal is expected to result in cost savings of $134 million on a pretax basis once fully phased in by 2013. Hancock expects the transaction will boost earnings 10% in 2012 and more so a year later.
Five members of Whitney's board of directors are expected to join the Hancock board upon completion of the merger.
Whitney Chairman and Chief Executive John C. Hope said the deal combines "two similarly sized companies with complementary cultures and strong brands creates the premier banking franchise in the Gulf South."
Whitney in October said issued that tempered its optimism in the second quarter - the Gulf oil spill, the weak economic recovery and the threat of another downturn in the economy- have all eased or been addressed.
