Fifth Third, a regional bank in the US has decided to acquire its smaller rival MB in a stock-and-cash deal of $4.7 billion, as part of its long-term strategy to expand its business in Chicago and beyond.
MB Financial currently owns about $20 billion in assets and has been operating in the region for over 100 years. It has a strong customer base in Chicago and it’s renowned for its strong deposit franchise and a customer centric corporate culture.
Fifth Third has increasingly invested in the Chicago area in the recent past and plans are underway to increase its presence in the entire region after consulting the Community Advisory Forum. The company has approximately 1,300 branches and 2,600 ATMS spread across 12 states in the US.
Deregulation Fuels Expansion Of Mid-Sized Firms
The Republican tax revamp has stimulated more investment among the medium-sized lenders and the financial institutions including banks are taking up available opportunities to expand their business entities.
In the recent past, there have been limited merger activities among the companies in the financial sector due to strict government rules and regulations that were established during the 2008 financial crisis in the US. With deregulation and support from the county governments, businesses are intensifying their expansion efforts to grow their companies.
The Benefits of The Merger
According to Greg D. Carmichael, Chairman, President and CEO of Fifth Third Bancorp, customers from both companies will largely gain from the superior service delivery and other complementary capabilities that the joint venture will offer.
The newly formed company is also expected to generate a high IRR of about 18.5%. In addition, the merger will speed up the adoption rate of innovative products and technology.
Furthermore, the merger will enable the companies to leverage their dedicated management teams to work diligently towards achieving the company goals. Also, the merger will influence the company’s complementary capabilities.
According to Tayfun Tuzun, CFO at Fifth Third, Chicago is a critical market for the bank since it has the highest number of mid-sized firms that are potential customers.
Once the deal closes, the MB Financial CEO, Mitch Feiger, will become the CEO and Chairman of the combined company. Other team members from both the two firms will also join the new company. However, the transaction will largely depend on the satisfaction of all customary and necessary closing conditions including obtaining of regulatory approvals.