FLINT—FirstMerit Corp. and Citizens Republic Bancorp, Inc. announced today that they have entered into a definitive agreement under which Akron-based FirstMerit will acquire Citizens in a stock-for-stock transaction with a total value of approximately $912 million based on FirstMerit’s average ten-day closing stock price ended September 12. The transaction creates a unique, contiguous Midwest banking franchise, expanding FirstMerit’s footprint into Michigan and Wisconsin, as well as strengthening its presence in Northeast Ohio.
Under the terms of the agreement, which was unanimously approved by the Boards of Directors of both companies, Citizens’ shareholders will receive a fixed 1.37 shares of FirstMerit common stock in exchange for each share of Citizens’ common stock. Based on FirstMerit’s average ten-day closing stock price ended September 12, the implied value of a Citizens’ share would be $22.50.
Upon completion of the transaction, the combined company will have approximately:
- $24 billion in total assets
- $15 billion in loans
- $19 billion in deposits
- 415 branches, 452 ATMs and more than 5,000 employees across the five contiguous states of Pennsylvania, Ohio, Michigan, Illinois, and Wisconsin
“With a five-state reach that will extend from Western Pennsylvania to Wisconsin, FirstMerit looks to become the bank of choice among businesses and individuals across the upper Midwest. As we have successfully demonstrated with our new customers in Chicago, we will provide a seamless transition of existing Citizens Republic relationships,” said Paul G. Greig, chairman, president and CEO of FirstMerit.
Greig, who will continue as chairman, president and CEO of the combined company, has extensive experience in Wisconsin where he was president and CEO of the Wisconsin market for Bank One and Chase, from 1999 to 2005. “Wisconsin and Michigan are both great geographic and demographic additions to our strong and successful franchise. This transaction also strengthens our position in Northeast Ohio. Our business model, our customers and the communities both banks serve all create opportunities that will have an immediate positive effect on FirstMerit and its ability to serve clients and grow shareholder value,” Greig said.
“Citizens Republic has made a strong comeback in recent years under Cathy Nash’s leadership. Combining Citizens’ organization, operating philosophy and talented employees with those of FirstMerit will make for an even stronger company,” said Greig.
Subject to the receipt of requisite approvals, FirstMerit also expects to repay Citizens’ approximately $345 million of TARP preferred stock, which includes $45 million of estimated deferred dividends, held by the U.S. Treasury at closing. FirstMerit expects to realize substantial net cost savings of $59 million on a pre-tax basis (approximately 22% of Citizens’ non-interest expenses), and anticipates that the transaction will be 7.5% accretive to earnings in 2014.
Following the merger, FirstMerit expects to retain its strong capital position with pro forma Tier 1 Ratio of approximately 10.36%, Total Risk-Based Capital of 12.67% and Tangible Common Equity to Tangible Assets of 7.15%, after restructuring charges and an anticipated capital raise of approximately $100 million of Tier 1 Preferred and $250 million of Tier 2 debt.
FirstMerit will also appoint two Citizens board members to its board of directors.
The acquisition is subject to customary closing conditions, including receipt of regulatory approvals and approval by both companies’ shareholders. The transaction is expected to close in the second quarter of 2013.
Citizens will be rebranded to the FirstMerit name. It is anticipated that the combined company will maintain its level of community involvement through charitable giving and other philanthropic activities following completion of the transaction.