CINCINNATI—The corporate tax cut passed by Congress may not have directly affected credit unions, but it is being felt indirectly as the competitive landscape changes as a result.
Fifth Third Bancorp said it has agreed to buy smaller rival MB Financial Inc. in a stock-and-cash deal valued at about $4.7 billion, as it looks to expand in Chicago and broaden its middle market customer base. The bank has credited the windfall from the tax cut for making cash available for the acquisition.
As part of the deal, each MB Financial shareholder will get $54.20, comprising 1.45 shares of Fifth Third common stock and $5.54 in cash, a 24% premium to MB Financial’s last close, Reuters reported.
D.A. Davidson analyst Kevin Reevey told Reuters Fifth Third was limited in their ability to expand in Ohio and that the acquisition of Chicago-based MB Financial was the most logical move for the bank from a geographical standpoint, in order to expand its deposit franchise.
The merger will result in the combined entity having a total Chicago deposit market share of 6.5%, ranking it fourth in total deposits among the nearly 200 banks in the marketplace, Fifth Third said.
Fifth Third Bank, which operates 1,300 branches and 2,600 ATMs across 12 states, said the deal is expected to reduce its regulatory common equity Tier 1 (CET1) ratio by about 45 basis points.
Fifth Third expects pretax cost savings of $255 million annually, following the closing of deal expected by end of year. It also expects to add about 2% to operating earnings per share in 2019 and nearly 7% in 2020, Reuters said.