Merger creating $45B bank
A bank with a large West Michigan presence is merging with an out-of-state holding company to create a new financial institution.
Detroit-based Chemical Financial Corporation (Nasdaq: CHFC) and Wayzata, Minnesota-based TCF Financial Corporation (NYSE: TCF) have signed a definitive agreement under which the companies will combine in an all-stock “merger of equals,” they said today.
The new bank and holding company will be headquartered in Detroit and operate under the TCF name and brand. It will maintain “a significant operating presence” in Minneapolis, as well as Midland and Chicago.
The merger is expected to close in the late third quarter or early fourth quarter of 2019, subject to customary closing conditions, including customary regulatory and shareholder approvals.
“The combination of TCF and Chemical creates the largest midcap bank in the Midwest, poised to deliver double-digit EPS accretion for each set of shareholders, significant cost synergies, top-tier return metrics, a more diversified balance sheet and a lower risk profile,” said Gary Torgow, chair, Chemical Financial Corporation.
“We also share a deep commitment to supporting and giving back to the communities we serve.”
Craig Dahl, chair, president and CEO of TCF Financial Corporation, said the merger will give the banks “stronger and more sustainable growth” and “greater value creation” than the two could achieve separately.
“The new TCF will have attractive positions in both its product suite and market footprint, as well as a more diversified loan portfolio and increased lending capabilities across asset classes, geographies and industry verticals,” Dahl said.
Under the terms of the deal, TCF shareholders will receive 0.5081 shares of Chemical common stock for each share of TCF common stock based on a fixed exchange ratio, equivalent to $21.58 per TCF share based on the closing price as of Jan. 25, 2019.
Upon completion of the deal, TCF and Chemical shareholders will own 54 percent and 46 percent of the combined company on a fully diluted basis.
The transaction is projected to deliver 17 percent earnings per share, or EPS, accretion to Chemical and 31 percent EPS accretion to TCF by 2020, with a “tangible book value earn-back period” of 2.7 years.
In addition, the transaction is expected to generate about $180 million in annual run-rate cost synergies by 2020, with “minimal reductions in branches.”
The combined company will have about $45 billion in assets, $34 billion in total deposits and more than 500 branches across nine states, including four of the top 10 Midwest markets.
It will “leverage the strengths” of Chemical’s community banking and wealth management capabilities with TCF’s “large deposit franchise and expertise in wholesale lending on a national basis.”
Governance and leadership
Craig Dahl will serve as president and CEO of the combined holding company.
Gary Torgow will serve as executive chair of the board of directors.
Vance Opperman, who is the current lead independent director of TCF Financial Corporation’s board of directors, will serve as lead independent director.
Dennis Klaeser will serve as CFO.
Brian Maass will serve as deputy CFO and treasurer.
David Provost will become chair of the combined bank.
Tom Shafer will be president and COO of the combined bank.
The combined company’s board will have 16 directors — eight from TCF and eight from Chemical.
New York-based Keefe, Bruyette & Woods is acting as financial advisor to Chemical.
Columbia, South Carolina-based Nelson Mullins Riley & Scarborough and New York-based Wachtell, Lipton, Rosen & Katz are serving as legal counsel to Chemical.
New York-based J.P. Morgan Securities and East Meadow, New York-based Perkins Advisors are acting as financial advisors to TCF.
New York-based Simpson Thacher & Bartlett is serving as legal counsel to TCF.
A free copy of the joint proxy statement and prospectus, as well as other filings containing information about Chemical and TCF, may be obtained at sec.gov once available.
Chemical Financial Corporation operates through its subsidiary, Chemical Bank, with 212 banking offices located primarily in Michigan, northeast Ohio and northern Indiana.
As of Dec. 31, 2018, Chemical had total consolidated assets of $21.5 billion.
TCF is a holding company and the parent of TCF Bank.
It has 314 bank branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota.
As of Dec. 31, 2018, TCF had $23.7 billion in total assets.