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Huntington Bancshares To Merge With TCF In $6 Billion Deal

Columbus-based Huntington Bancshares has decided to acquire the Detroit-based TCF Financial in a $6 billion all-stock merger. The deal would result in one of the 20 largest banks in the country. The TCF shareholders will receive three Huntington shares for each TCF share held along with an 11% premium to the closing price of their shares on Friday.

The Merged Entity

The combined holding company and bank will operate under the brand name of Huntington while TCF’s name will disappear. The resulting firm will hold assets of $168 billion, loans of $117 billion, and deposits of $134 billion. Based on Huntington’s vast history, the deal is the biggest with being nearly twice as large as the previous acquisition of FirstMerit for $3.4 billion in 2016. The resulting firm will have a value of $22 billion.

Advisers To Huntington and TCF

Financial advisers to Huntington include Goldman Sachs while Wachtell, Lipton, Rosen & Katz are acting as legal advisers.

For TCF, Keefe, Bruyette & Woods is acting as a financial adviser with Simpson, Thacher & Bartlett serving as legal adviser.

Expansion For Huntington

Now, the question arises about the purpose of the purchase by Huntington. For one, the merger would allow Huntington to expand into new markets as far west as Colorado with a strong presence in Chicago and new markets in Minneapolis, Milwaukee, and Denver. Such expansion would lead to a better market position for Huntington along with more revenue streams.

What’s more, is that the merger would put Huntington in a better competing position against its biggest rivals; Fifth Third which has assets worth $170.5 billion and KeyCorp which has $202 billion in assets.

TCF vs Huntington

TCF, the biggest bank headquartered in Michigan, on the other hand, has a market capitalization of $5.4 billion, almost half as compared to Huntington’s market value of $13.1 billion. The bank has around 475 branches out of which 100 are in Chicago, about three times more than Huntington’s branches in the area.

TCF Merger History

The bank is not new to mergers. The current deal with Huntington marks the fourteenth merger for TCF’s CEO Gary Torgow. The first merger happened in 2017 with the then called First Michigan which is now known as Talmer Bank. In 2016, Torgow, along with the present TCF president Tom Shafer and fellow executive David Provost took control of the Chemical Bank. In 2019, the trio combined TCF and Chemical Bank and made it the country’s 27th biggest bank with $47 billion in assets and $35 billion in deposits.

Dual Headquarters

The merger has decided to set up dual headquarters with commercial operations based in Detroit and consumer operations in Columbus. TCF Bank’s new headquarters are under construction in Detroit and are expected to be completed by the middle of 2022. The building would hold at least 800 workers of the merged bank. The headquarters of the newly merged firm will also be in Columbus. Moreover, the newly renamed TCF Center would also be converted to the Huntington Center.

Laying Off Branches & Employees

TCF operates across seven states while Huntington across eight states with employees around 7,300 and 15,700, respectively. Huntington’s chairman, Steve Steinour pointed out that there will be redundancies of some branches and employees, yet he couldn’t specify numbers. A spokesperson from TCF said that the new firm will employ at least 20,000 employees.

Who Will Take Charge?

Post the transaction, Steve Steinour, Huntington’s chairman would remain the holding company’s CEO, chairman, and president. He will also be the bank’s CEO and president. While TCF’s chairman Gary Torgow will act as the chairman of the bank’s board of directors. Costs would be cut by $490 million and around 18% will be added to earnings per share in 2022.

Philanthropy – A Key Element For Huntington & TCF

Both companies have undertaken several philanthropic activities in recent months. Huntington has promised to contribute $50 million to a new fund at the Community Foundation for Southeast Michigan. TCF has also recently announced to extend a $1 billion loan to minority and female-owned businesses over five years.

Performance Of Shares

TCF Financial shares fell 2.5% Friday to $34.78 per share. The price of the shares has almost doubled as compared to March when the pandemic hit markets across the world. On March 18, TCF closed at $18.35 per share. Yet, today’s price is less as compared to last year when it was $46.80 per share on 31st December 2019.

For Huntington, shares went down 0.77% Monday at $12.93. Huntington’s price has also gone up as compared to March when it was down to $7 per share on March 23.

 

The deal is expected to be concluded in the second quarter of next year and is subject to regulatory and shareholder approval.

There has been a growing trend of regional banks consolidating to compete against banking giants like JP Morgan Chase and Bank of America. Last month, PNC Financial Services decided to buy Spanish bank BBVA’s U.S operations for $11.6 billion marking one of the biggest deals in banking this year.

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