Sept 13 - FirstMerit Corp. (NASDAQ: FMER) and Citizens Republic Bancorp Inc. (NASDAQ: CRBC) have entered into a definitive agreement under which FirstMerit will acquire Citizens in a stock-for-stock transaction with a total value of approximately $912 million based on FirstMerit's average 10-day closing stock price ended Sept. 12, 2012. 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 10-day closing stock price ended Sept. 12, 2012, the implied value of a Citizens' share would be $22.50.
On completion of the transaction, the combined company will have approximately:
"We are excited to bring FirstMerit to new customers and communities throughout Michigan and Wisconsin. These two states offer a strong cultural fit for our proven super community bank model of providing world-class products and services through local delivery by bankers our customers know and trust," said Paul G. Greig, chairman, president and CEO of FirstMerit. "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.
"FirstMerit enters our new markets as one of the country's strongest and most stable banks with a long history of profitability and capital levels among the highest in the industry. We look forward to serving our new customers and working with our new colleagues as members of the FirstMerit family," said Greig.
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.
"The Citizens board and management team believe that combining with FirstMerit will deliver significant value for our shareholders, while allowing them to participate in the tremendous upside potential of a stronger bank with increased scale," stated Cathleen Nash, president and CEO of Citizens. "For our clients, this merger doubles the branch network, expanding it across the upper Midwest, and provides access to an enhanced suite of products and services. Furthermore, with shared core values and a similar culture, the combined company will provide increased opportunities to many of our bankers. On behalf of the entire Citizens board and management team, we thank our dedicated employees for their continued hard work – especially over the past several years – and look forward to working with Paul and the FirstMerit team to complete this exciting transaction."
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 percent of Citizens' non-interest expenses), and anticipates that the transaction will be 7.5 percent 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 percent, total risk-based capital of 12.67 percent and tangible common equity to tangible assets of 7.15 percent, 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.
RBC Capital Markets LLC acted as financial adviser to FirstMerit and rendered a fairness opinion in connection with the transaction, and Jones Day acted as FirstMerit's legal counsel. J.P. Morgan Securities LLC acted as financial adviser to Citizens and rendered a fairness opinion in connection with the transaction, and Dykema Gossett acted as Citizens' legal counsel.