Huntington Bancshares in Columbus, Ohio, and TCF Financial in Detroit hammered out 2020’s second-biggest bank merger in just 45 days.
The companies evaluated each other's loan portfolios and agreed to the terms of a
The blistering pace shows the familiarity Huntington and TCF had with each other, their confidence in the merger and the uncertainty banks were facing at the end of last year because of the coronavirus pandemic, industry experts said.
"It is a bit of a unique transaction where you had a thoughtful buyer and a nimble seller," said Scott Siefers, an analyst at Piper Sandler.
"I'm sure these guys had been kicking the tires informally for a long time ... and there were points last year where no one had any great sense of where the world was heading," Siefers said. "I have enough faith in the companies' due diligence to give them the benefit of the doubt with such a short turnaround."
Steinour, Torgow and TCF Chief Executive David Provost had discussed community and neighborhood support and development programs in the past but had never talked about a merger until Steinour’s call to Torgow, the companies said in
That phone call came three days after TCF announced its third-quarter earnings and disclosed that
Steinour, Torgow and Provost had several discussions over the next two weeks, and they agreed to an outline of the deal’s terms on Nov. 16.
Those terms included paying at least 90% of the merger consideration in stock, TCF gaining five board seats and plans for dual headquarters in Columbus and Detroit. The executives agreed to increase total employment at TCF’s Detroit headquarters by at least 800 employees and that Torgow would become chairman of Huntington’s bank.
It was understood that Torgow and Provost would enter into advisory and non-competition agreements to “assist in business development and customer, community and government relations following the closing,” the filing said.
Huntington and TCF signed a nondisclosure agreement on Nov. 20 so each could conduct due diligence. Each company was pouring through financial documents within days.
TCF, to expedite the process, brought in Dennis Klaeser, who retired as its chief financial officer on Oct. 1, to evaluate the transaction. Klaeser, who was operating under a two-year consulting agreement that paid him $215,000 each year, will also receive a $4.3 million “success fee” for his role, the filing said.
Each company’s boards held regular meetings in November and early December to receive updates on the deal. The parties agreed by Dec. 13 to an exchange ratio that equaled an 11.6% premium to TCF’s closing stock price on Dec. 11 and gave TCF shareholders a 31% stake in Huntington.
The Huntington and TCF boards unanimously approved the deal on Dec. 13; it was
Huntington will have assets of $168 billion, putting it in the neighborhood of big regionals like KeyCorp in Cleveland and Citizens Financial Group in Providence, R.I. The deal, which is expected to close in the second quarter, priced TCF at 150% of its tangible book value.
Columbus would serve as the headquarters for Huntington and the consumer banking unit; the commercial bank would be based in Detroit.
Huntington expects the merger to be 18% accretive to its 2022 earnings per share. It should to take about three years for Huntington to earn back an expected 7% dilution to its tangible book value.
The company will cut $490 million in annual expenses, or roughly 37% of TCF’s annual operating costs. About a quarter of the expected savings would come from closing overlapping branches, and Huntington plans to 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.
“This merger combines the best of both companies and provides the scale and resources to drive increased long-term shareholder value,” Steinour, who would remain chairman and CEO, said in the press release announcing the deal. “Huntington is focused on accelerating digital investments to further enhance our … customer experience.”
The filing noted that Provost is entitled to $7.5 million in merger-related compensation, primarily in cash, while Torgow is in line to receive $14.5 million that is roughly split between cash and equity. Tom Shafer, who was tapped to lead TCF National Bank when Dahl retired, would receive $7.4 million cash and $4.6 million in equity.
Dahl “is not entitled to merger-related compensation,” the filing said.
