First Merchants to buy Independent Alliance in Indiana for $251M

First Merchants in Muncie, Ind., has agreed to buy Independent Alliance Banks in Fort Wayne, Ind.

The $7.2 billion-asset First Merchants said in a press release Friday that it will pay $251.3 million in cash and stock for the $1.1 billion-asset Independent Alliance. The deal, which is expected to close in the third quarter, values Independent Alliance at 252% of its tangible book value.

Independent Alliance has 16 branches, $753 million in loans and $861 million in deposits. It had the fifth-biggest deposit market share in Fort Wayne on June 30, based on data from the Federal Deposit Insurance Corp.

The deal comes months after First Merchants disclosed that it bought 12% of Independent Alliance’s common stock from a shareholder for $19.8 million in cash. The acquisitive First Merchants also agreed earlier this year to buy Arlington Bank in Upper Arlington, Ohio.

Independent Alliance “is a logical geographic extension for us given the less than 20-mile proximity of our nearest banking center locations,” Michael Rechin, First Merchants’ president and CEO, said in the release. Its “markets in northeast Indiana, and specifically Fort Wayne, offer outstanding growth opportunities.”

The deal is expected to be accretive by 2% in 2017 and by 5% in subsequent years. It should take about 3.8 years to earn back the deal’s expected dilution to First Merchants’ tangible book value.

First Merchants plans to cut 38% of Independent Alliance's annual noninterest expense, or roughly $10.9 million. The company said it expects preclosing charges of $8.3 million and merger-related costs of $7.2 million.

William Thatcher III, Independent Alliance’s chief operating officer, will become a regional president.

SunTrust Robinson Humphrey, Sandler O’Neill and Bingham Greenebaum Doll advised First Merchants. ProBank Austin and Shumaker, Loop & Kendrick advised Independent Alliance.