Old National in Evansville, Ind., has agreed to buy KleinBank in Chaska, Minn.
The $17.5 billion-asset Old National said in a press release Thursday that it will pay $433.8 million in stock for the $2 billion-asset KleinBank. The deal, which is expected to close in the fourth quarter, prices KleinBank at 236% of its tangible book value.
KleinBank, a family owned bank founded in 1907, has 18 branches, $1.1 billion in loans and $1.7 billion in deposits.
Old National said it will have the fifth-biggest deposit market share in Minneapolis when the deal closes. Minneapolis will also become Old National’s biggest market, with $3.5 billion in deposits.
“We look forward to continuing the legacy of exceptional client service and strong community engagement that has defined KleinBank for more than 110 years and four generations,” Bob Jones, Old National’s chairman and CEO, said in the release. “We believe the enhanced scale, product capability, and market coverage that this combination creates positions us exceptionally well in the Twin Cities.”
Old National said it expects the acquisition to be 6.2% accretive to its 2020 earnings per share, including cost savings. It should take less than four years to earn back the projected 3.4% dilution to Old National’s tangible book value.
Old National said it plans to cut about 40% of KleinBank's annual noninterest expenses, or $22.5 million. The company expects to incur $40.3 million in merger-related expenses.
The company said KleinBank will lose about $2.1 million in annual interchange fee revenue under the Durbin Amendment.
Old National was advised by Keefe, Bruyette and Woods and Krieg DeVault. KleinBank was advised by Sandler O’Neill and Dorsey & Whitney.
