Huntington agrees to buy TCF Financial for $6 billion

Huntington Bancshares in Columbus, Ohio, has agreed to buy TCF Financial in Detroit in a move that would accelerate the pace of regional bank consolidation.

The Midwestern companies unveiled the $6 billion all-stock deal, which would create a company with a market value of $22 billion, late Sunday after The Wall Street Journal and other news outlets reported an announcement was imminent.

“This merger combines the best of both companies and provides the scale and resources to drive increased long-term shareholder value,” Stephen Steinour, who will remain Huntington’s chairman and CEO when the deal closes, said in a press release. “Huntington is focused on accelerating digital investments to further enhance our … customer experience.”

The combined company would have $168 billion in assets, putting it in the neighborhood of big regionals like KeyCorp in Cleveland and Citizens Financial Group in Providence, R.I. Huntington has $120 billion of assets.

The deal, which is the biggest announced among banks in 2020, priced TCF at 150% of its tangible book value.

The year's other large deals include South State’s merger with CenterState Bank, First Citizens BancShares’ proposed purchase of CIT Group, and PNC Financial Services Group’s deal to acquire BBVA Compass Bancshares.

Huntington, which would retain its name, would have $134 billion in deposits after the deal closes. The companies have a total of 1,312 branches, with the biggest overlap in Michigan. Huntington said it expects to divest about $450 million in deposits.

Huntington said in the release that the acquisition would provide it with an entrée into Minnesota, Colorado, Wisconsin and South Dakota and expand its market share in Chicago.

The merger is expected to close in the second quarter.

TCF, in an explainer of the deal on its website, said its branches would continue to operate under the TCF brand until a systems integration occurs later in 2021.

Gary Torgow, TCF’s chairman, would have the same title at Huntington Bank.

“We will be a top regional bank, with the scale to compete and the passion to serve,” Torgow said in the release.

Columbus would serve as the headquarters for Huntington and the consumer banking unit, while the commercial bank would be based in Detroit.

Huntington said it expects the merger will be 18% accretive to its 2022 earnings per share. It is expected to take about three years for Huntington to earn back an expected 7% dilution to its tangible book value.

The company plans to cut $490 million in annual expenses, or roughly 37% of TCF’s operating costs. About a quarter of the expected cost savings would come from closing overlapping branches. Huntington would reinvest about $150 million into technology improvements over the next three to four years.

Huntington also expects to incur $880 million in merger-related expenses.

TCF’s sale continues a recurring narrative for David Provost, who became TCF’s CEO in October with the unexpected retirement of Craig Dahl.

Provost sold Talmer Bancorp to Chemical Financial in 2016. He became Chemical’s CEO in late 2018 after his predecessor’s sudden departure, then announced a merger with TCF in January 2019.

TCF had spent the last two months reviewing ways to add revenue, including an expansion of commercial lending around Minneapolis and Chicago, and cut costs. Executives had also been reviewing the branch network, which includes more than 500 locations.

TCF’s assets fell by 2.1% between March 31 and Sept. 30, to $45.8 billion. The third-quarter amount included $1.8 billion in loans originated under the Paycheck Protection Program. Deposits rose by 9% to $39.2 billion.

Goldman Sachs and Wachtell, Lipton, Rosen & Katz advised Huntington. Keefe, Bruyette & Woods and Simpson, Thacher & Bartlett advised TCF.