Indiana-based Old National Bancorp. ( ONB ) recently entered into a definitive merger agreement with United Bancorp, Inc., the Ann Arbor, Michigan-based financial service provider. The merger deal, subject to United Bancorp shareholders' approval as well as regulatory sanction and other customary closing conditions, is expected to close by the end of second-quarter 2014.
Once the deal is completed, United Bancorp will be part of the merged unit and will cease to exist separately. Therefore existing stockholders of the company will get 0.70 shares of Old National common stock as well as $2.66 in cash for holding per unit of United Bancorp stock.
Considering the closing price of Old National Bancorp's stock on Jan 6, the deal is tentatively worth $173.1 million or $13.17 per share of United Bancorp. However, the total value might change based on the movement in Old National Bancorp's share price. Moreover, the stock exchange ratio (of 0.70) is not fixed and might be adjusted as per the mutual engagement of the companies in the agreement.
The merger will facilitate Old National Bancorp's expansion in the lucrative market of Ann Arbor, which will enable the company to strengthen its presence in Michigan. United Bancorp's 18 branches with deposits worth $806 million and loans worth $643 million are spread across four major regions of Michigan. Further, United Bancorp's attractive revenue mix, wealth management portfolio and flourishing small business lending activities will further boost Old National Bancorp's growth prospects.
How effective the deal will be? Let us dig a little deeper to analyze the situation.
The Michigan market is dominated by brand names like CIT Group, Huntington Bancshares, Comerica and Barclays. So the merger will ensure sustainable long-term growth in such a competitive environment.
Further, the merged unit will render enhanced services for the client base in the form of improved customer services as well as diverse product offerings.
As regards Old National Bancorp, we observe that it has been on an expansion spree for quite some time. The Midwest bank's steady earnings in the trailing four quarters have aided its inorganic growth strategy.
In Dec 2013, Old National Insurance - Old National Bancorp's wholly owned subsidiary - acquired the insurance accounts serviced by the Evansville branch of Wells Fargo Insurance, which is a division of Wells Fargo & Company ( WFC ). In September in the same year, the company announced a deal to acquire Tower Financial Corp. ( TOFC ) in a cash-cum-stock deal worth nearly $108 million. The transaction is expected to close in the first quarter of 2014.
In Jul 2013, Old National Bancorp completed the integration of 24 branches of Bank of America Corporation ( BAC ) located in Northern Indiana and Southwestern Michigan.
Currently, Old National Bancorp carries a Zacks Rank #1 (Strong Buy), reflecting its impressive performance as well as growth potential.