Huntington Bancshares Inc. on Wednesday announced a $3.6 billion cash and stock deal for the $17.6 billion-asset Sky Financial Group Inc. of Bowling Green, Ohio, bringing together two companies that had been considered likely consolidators in the Midwest.
Thomas E. Hoaglin, Huntington's chairman, chief executive, and president, has said several times this year that he would like his $35.7 billion-asset Columbus, Ohio, company to be a consolidator. Both companies have acquisitive pasts, and earlier Wednesday analysts at Keefe, Bruyette & Woods Inc. had listed both as likely buyers in 2007.
Still, though the combination gives the new company the boost each had sought in some major midwestern markets, the size of the deal was "unexpected," said Michael Kon, an analyst at Morningstar Inc. Related Link
Sky, which brings 330 branches to the deal, has operations in Pennsylvania - a new state for Huntington - and Ohio, Michigan, West Virginia, Pennsylvania, and Indiana, states where Huntington already has a presence. Huntington said it would have 756 branches upon completion of the deal, which it expects to occur in the third quarter of 2007.
"This merger is consistent with our conviction that Huntington can create shareholder value by participating in consolidation in the Midwest and lowering costs and increasing customer convenience," Mr. Hoaglin said in a press release announcing the deal.
Huntington said the deal would be immediately accretive to earnings, though it will require a one-time charge, and save Huntington about $115 million in expenses a year. The purchase price is a 25% premium to Sky's closing price on Tuesday, the companies said.
Sky Financial has been an active buyer, using a string of deals in recent years to increase its assets and expand into new markets.
Last month it closed a deal for another Ohio banking company, Wells River Bancorp Inc. in Wellsville, Ohio, and its Perpetual Savings Bank. In October, the company expanded into a new market when it bought Waterfield Mortgage Co. in Fort Wayne, Ind., and its Union Federal Bank.
In an interview in August, Marty Adams, Sky Financial Group's chairman, president, and chief executive officer, had identified Indianapolis, Cleveland, and Columbus as markets where Sky would look for opportunities to buy - markets, as it turns out, where the company he opted to sell to is strong.
Neither executive was available to comment. In the companies' joint statement, Mr. Adams said: "Both companies have deep-rooted ties to the communities in which we operate and share a commitment to delivering the best products and services to our customers locally. We expect this transaction to benefit our loyal customers significantly by giving them added convenience and access to Huntington's many services, including its proven wealth and investment management expertise."
Huntington's most recent bank purchase was of Unizan Financial Corp. in Canton, Ohio, last March, a deal that took more than two years to close after Huntington ran afoul of regulators. Securities and banking regulators delayed approving the transaction while they investigated questions about Huntington's policies on loan-loss reserving and its accounting for auto loans.
During the intervening two years, Huntington spent much time and energy reassuring its own and Unizan's shareholders, customers, and employees, while defending its reputation as a dedicated acquirer. It did so under the watchful eye of the Federal Reserve, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission.
After agreeing to fix internal controls and squaring itself with banking regulators, it also struck a deal with the SEC and got the Unizan deal done.
