Citizens Republic Bancorp Inc.
) has finally found a buyer in
). The two banks have reached an agreement under which Citizens
will be acquired by FirstMerit in an all-stock deal valued at
around $912 million, based on FirstMerit's average ten-day closing
stock price ended September 12.
CITIZENS BKNG (CRBC): Free Stock Analysis
FIFTH THIRD BK (FITB): Free Stock Analysis
FIRSTMERIT CORP (FMER): Free Stock Analysis
HUNTINGTON BANC (HBAN): Free Stock Analysis
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The deal to acquire Citizens Republic, the largest bank holding
company headquartered in Michigan and the 57th largest bank holding
company headquartered in the United States, offers FirstMerit
significant upside potential of a stronger bank with increased
vigor. In recent months, the market was rife with rumors that
Huntington Bancshares Inc.
Fifth Third Bancorp
) had shown interest in taking over Citizens.
FirstMerit is expected to benefit from the deal as it would
strengthen its business in the Midwest. It involves complementary
footprint across five contiguous Midwest States, fortifies the
company's presence in Northeast Ohio and broadens FirstMerit's
reach into Michigan and Wisconsin.
On the other hand, Citizens, which suffered substantial losses
during the financial crisis, has only recently recovered. However,
increased regulations and stringent capital requirements along with
exposures to problematic assets have been a concern.
The transaction, which is subject to customary closing conditions,
including receiving the approval from regulators as well as
shareholders of both the companies, is anticipated to close in the
second quarter of 2013. The deal is anticipated to be significantly
accretive to earnings in 2014.
As per the deal terms, the shareholders of Citizens' will get a
fixed 1.37 shares of FirstMerit's common stock for each share of
Citizens' common stock. Considering the average ten-day closing
stock price of FirstMerit ended September 12, this will result in a
valuation of $22.50 for each of Citizens' shares.
Following the deal closure, the combined bank can boast of around
$24 billion in total assets and 415 branches, 452 ATMs and more
than 5,000 employees across the five Midwest States of
Pennsylvania, Ohio, Michigan, Illinois, and Wisconsin.
However, FirstMerit will have to repay the bailout money that
Citizens received. FirstMerit intends to repay Citizens' $345
million of TARP preferred stock issued to the U.S. Treasury. Also,
there exists the risk of integration.
Currently, both Citizens Republic and FirstMerit shares retain a
Zacks #3 Rank, which translates into a short-term Hold