First Midwest Bancorp in Chicago and Old National Bancorp in Evansville, Indiana, agreed to an all-stock merger of equals that would create a $45 billion-asset Midwestern regional player.
The board of the combined institution would be split evenly with eight directors each from First Midwest and Old National, though Old National investors would own 56% and the entity would take the Old National name.
Michael Scudder, chairman and CEO of the $21.2 billion-asset First Midwest, will serve as executive chairman. Jim Ryan, the $23.7 billion-asset Old National’s chairman and CEO, will be CEO.
Under the terms of the deal, which is expected to close late in 2021 or early in 2022, First Midwest shareholders will receive 1.1336 Old National shares for each First Midwest share they own. The estimated price of the deal is $2.5 billion, and the combined company would have a market capitalization of $6.5 billion.
The combined bank will rank as the sixth-largest Midwestern banking franchise, with a presence in six of the region’s largest markets, including St. Louis, Milwaukee, Minneapolis, Indianapolis and — most critically for Old National — Chicago.
It would hold $34 billion of deposits and $33 billion of assets under management.
According to Federal Deposit Insurance Corp. statistics, First Midwest is the ninth-largest Chicago bank, holding nearly 3% of its $516 billion deposit market.
“We are confident that the powerful synergies, additional market coverage and financial strength this partnership creates will drive long-term shareholder value,” Ryan said Tuesday in a press release.
First Midwest and Old National said they have identified $109 million in cost savings equivalent to 11% of the combined noninterest cost base. They expect 75% will be realized in 2022.
Old National projects that it will earn back the dilution to its tangible book value in a little over three years. It’s also projecting 22% earnings accretion in 2022.
“We find the significant earnings accretion to outweigh the sizable earn-back,” Hovde analyst Ben Gerlinger wrote Tuesday in a research note.
