Akron-based FirstMerit Corp. is more than doubling its number of branches in its largest acquisition ever for $912 million.
Bank officials on Wednesday announced the bank would buy Flint, Mich.-based Citizens Republic Bancorp Inc., which has 219 offices in Michigan, Ohio and Wisconsin.
Citizens Republic has branches in Fairlawn behind Summit Mall, in Hudson on Aurora Street and on North Court Street in Medina and Pearl Road in Strongsville, as well as in the Cleveland area. The Citizens Republic locations will be rebranded as FirstMerit branches.
Citizens Republic is not affiliated with Citizens Bank, owner of Charter One Bank.
The acquisition is expected to close in the second quarter of 2013.
The move will create a contiguous Midwest banking franchise for FirstMerit, expanding its footprint into Michigan and Wisconsin and strengthening its presence in Northeast Ohio, bank officials said.
“We are excited to bring FirstMerit to new customers and communities throughout Michigan and Wisconsin,” said FirstMerit Chairman, President and Chief Executive Officer Paul G. Greig, who will remain in his roles for the combined company.
Greig is familiar with the new territory, having served as president and CEO of the Wisconsin market for Bank One and Chase from 1999 to 2005.
“These two states offer a strong cultural fit for our proven super community bank model of providing world-class products and services through local delivery by bankers our customers know and trust,” he said.
When asked about Akron remaining the headquarters for a larger FirstMerit, Greig emphasized the bank’s commitment to Akron and Northeast Ohio operations.
“That commitment to Akron and our operations throughout all of Northeast Ohio is unwavering,” he said.
In a telephone interview after the announcement, Greig said the bank had looked at more than 30 opportunities for other acquisitions in the last few years.
“Citizens has the size and scale and two very good markets,” said Greig. “It’s a very sizeable transaction. The combined companies will be much stronger than the companies run separately.”
Greig said FirstMerit officials have been studying the Michigan market and making trips to the state to the north since 2005.
“We’ve been having discussions with this company for a good number of years,” Greig said. “This coming to fruition is the result of a long process.”
Greig said the bank cultures are similar and FirstMerit’s model of “super community bank,” or access to local decision makers, will work well in the new markets, especially for commercial business.
Michigan’s economy, especially, has shown signs of rebounding, Greig said.
After the completion of the acquisition, the combined company will have $24 billion in total assets, $15 billion in loans, $19 billion in deposits, 415 branches, 452 ATMs and more than 5,000 employees across five states. In July, FirstMerit said it had 2,789 full-time equivalent employees. FirstMerit currently has 196 branches.
It is the first purchase for FirstMerit since 2010, when it began expanding with a push to Chicago, acquiring one bank and winning two bids on banks seized by federal regulators.
It is also the bank’s largest acquisition — the deal is a stock-for-stock transaction with a total value of about $912 million based on FirstMerit’s average 10-day closing stock price ending Wednesday.
The largest deal before this was the $90 million acquisition of Midwest Bank in Chicago from the FDIC in 2010.
As part of the proposed deal, FirstMerit will repay Citizens’ approximately $345 million of TARP preferred stock, which includes $45 million of estimated deferred dividends.
FirstMerit will also appoint two Citizens board members to its board.
Approval still needed
The deal is pending regulatory approval and approval by shareholders of both companies.
Greig said Citizens President and CEO Cathleen Nash will stay on during the transition and integration and it has not been discussed what role she will have beyond that time.
In a conference call with financial analysts, banking analyst Terry J. McEvoy with Oppenheimer & Co., having followed both FirstMerit and Citizens for 10 years, said “the deal makes a lot of sense on many levels.”
Another analyst asked about FirstMerit’s commitment to the Chicago market, which was the focus of its expansion and an area of expertise for Greig and other senior bank officials.
Greig said: “There is absolutely no method here that we are de-emphasizing Chicago. Chicago has been a great story for us and will continue to be a great story. We are looking for additional opportunities in Chicago.”
However, Greig said the Citizens transaction would take the bank out of the market for any new acquisitions for about a year, and that the bank had scanned the market and potential acquisitions.
When asked about potential bank closures due to duplications — for instance, there is a Citizens Bank at 890 N. Court St. and a FirstMerit branch at 975 N. Court St. in Medina — Greig said: “It’s way too soon to say anything specific about that. This deal just got announced.”
FirstMerit shares (NASDAQ: FMER) closed down $1.93 to $15.23. Citizens Republic Bancorp shares (NASDAQ: CRBC) closed up 12 cents to $19.99.