This deal is not only this year’s biggest bank deal
, it is also the largest merger to be announced in about three years. Additionally, it marks the $142 billion-asset Fifth Third’s first post-crisis bank deal — its last acquisition was the 2008 purchase of First Charter in Charlotte, N.C.
This deal has more people wondering if other regional banks will take a hard look at acquisitions. Many may bide their time to see if investors eventually grow comfortable with this deal’s tangible book value dilution, long earnback period and aggressive cost-cutting targets
. The deal priced MB Financial at 276% of its tangible book value.
“Fifth Third has a target on its back to execute,” said Chris Marinac, an analyst at FIG Parners. “They have to [perform] flawlessly to get investors back.”
A sense of urgency may have prompted Fifth Third to buy MB Financial, which is based in Chicago. A number of large banks in the Windy City — PrivateBancorp, FirstMerit and Taylor Capital — have been acquired in recent years. And Fifth Third had no interest in a nickel-and-dime strategy.
“A smaller, less-additive deal would be a distraction for a significant period of time,” said Greg Carmichael, Fifth Third’s chairman and CEO. “There are very few that create the scale in such an attractive market. This is important to us.”