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MB Financial has agreed to buy Taylor Capital Group. The deal would create one of the largest banking companies in Chicago.
July 15 -
Lawmakers have set $10 billion in assets as a dividing line between small and large banks for regulatory purposes. That's left bankers at Trustmark's Gerard Host and other institutions that are approaching the cutoff with a choice: Deliberately limit their size or pursue acquisitions to solidly cross the threshold.
August 14 -
Move over, Wintrust. MB is poised to end its three-year hiatus from dealmaking.
February 13 -
M&A could leave Chicago with 100 banks in seven years; rural banks in Midwest fetch better prices; and some large banks may have to shrink, say Stephen Nelson and Eugene Katz of D.A. Davidson.
November 20 -
Mark Hoppe, the president and chief executive of Taylor Capital Group, waited 991 days for a profit. This past quarter his company delivered, earning $33.4 million.
November 1
An announcement in the middle of the night changed banking in Chicago.
When MB Financial (MBFI) agreed in the wee hours Monday to
Perhaps more importantly, it could signal that bank M&A in Chicago is finally moving from a period of talk to one of action.
"I'm not sure the floodgates are going to open," says Eugene Katz, a managing director at D.A. Davidson in Chicago. "But I think it raises a lot of questions internally at the other Chicago banks in terms of their strategy and what they want to do."
The group includes
Illinois was one of the last states to allow branch banking, so there are a lot of banks in Chicago. Chief executives of the largest community banks in town have been quick to talk about
Now that one of them the $5.9 billion-asset Taylor has moved to the seller side of the table, the game has changed.
The $9.4 billion-asset MB has agreed to pay Taylor's shareholders a 180% premium for their shares, one of the highest premiums paid in the U.S., and likely the highest paid for a Midwest bank, this year. That is a good sign for M&A in Chicago, Katz says.
"That is a huge vote of confidence for Chicago," Katz says.
However, larger banks that had aspirations of breaking into Chicago by buying one of its big community banks, may view the transaction more negatively. "When the larger banks eventually decide to expand, now there are only four ways into Chicago," says Chris McGratty, an analyst at Keefe Bruyette & Woods. "The scarcity value that this deal creates is incrementally good for everyone else."
Taylor's successful expansion of its product lines had created a problem, its analysts say. Their growth was limited by its distribution network.
Mark Hoppe joined Taylor in 2008 as president and chief executive at a pivotal moment for the local market, after ABN Amro sold LaSalle Bank to Bank of America (BAC) in 2007. He was tasked with trying to lessen Taylor's dependence on commercial real estate lending, and make it more of a business lender. Hoppe, the former president of LaSalle Bank Midwest in Michigan, recruited dozens of former LaSalle bankers to do so.
That plan was complicated by the downturn, and Taylor
Alongside dealing with problem assets, the company expanded its commercial business, launched a lucrative mortgage business and started asset-based lending and leasing divisions. As those business lines expanded, Hoppe often talked about the company's interest in doing a branch transaction to expand its nine-branch presence.
Essentially, Taylor's growth engines were being held back by a lack of fire power provided by a disproportionately small branch network.
"For us to be able to reach the potential of the people we have, we decided that pairing with a larger platform with larger capital was the way to go," Hoppe says. "We had pretty specific criteria [for a branch deal], and we were never able to put anything together that made sense to us. But we knew that a $6 billion-asset bank with nine banking centers wasn't going to be enough."
For MB, the deal is its first for an open bank since 2006, although it was among the busiest acquirers of failed banks during 2009 and 2010. Analysts say they were not surprised that MB struck a deal because President and CEO Mitchell Feiger had been signaling that he was potentially looking for something to buy.
He told investors and analysts in January that MB didn't buy back any stock because there
A call to MB was not returned, but Feiger said on a conference call Monday that he was most attracted to Taylor's commercial business. Both companies currently target businesses with sales of $10 million to $250 million, and Hoppe says each has about 1,000 clients. MB has a more robust offering of fee-based businesses.
"Combining our middle-market banking businesses and teams and clients will make us much more competitive in a very competitive market," Feiger says. "We believe that our resulting middle-market market share will be among the highest in the Chicago area."