Insights on the Global Financials

Click Here To Learn More About Hamilton Capital ETFs

Another U.S. Mid-Cap Bank Deal as HBAN Buys FMER

The trend in U.S. mid-cap bank M&A continues, with Huntington Bancshares Incorporated (HBAN) announcing an agreement to acquire FirstMerit Corporation (FMER) for US$3.4 bln. HBAN is paying 1.6x tangible book value in a stock and cash transaction (75%/25%), implying a 31% premium for FMER shareholders as of yesterday’s close. The deal follows a very steep correction in the U.S. banks year-to-date (e.g., BKX down ~18%, KRX down ~17%).

Of note, in 2013, FMER acquired Citizens Republic, which was the subject of our 2011 Mid-Cap Bank Case Study (click here)‎.

Today’s deal highlights why we favour mid-cap banks to their larger peers. The mid-cap banks generally have greater rate sensitivity, lower regulatory risk, and the potential to participate in industry consolidation – as evidenced by a pick-up in deal activity. Although still inexpensive, the “mega-caps” continue to face a tougher regulatory environment, and in the case of the universal banks, a difficult capital markets environment.

The deal is anticipated to be accretive to 2017 earnings, ex-merger costs, and 10% accretive to 2018 earnings after all synergies are implemented. The two companies currently have significant geographic overlap across the U.S. Midwest and the acquisition will create the largest bank in Ohio. Post-acquisition, HBAN will have ~$100 bln of assets, after the inclusion of ~$25 bln of assets currently held by FMER.

Related Funds
HBG: Hamilton Capital Global Bank ETF
Hamilton Capital Global Financials Fund LP

Related Posts
U.S. Banks: Two Significant Deals in Two Days Met with Market Skepticism
U.S. Banks: Revisiting “100 Bank Mergers”, 3 Years Later
100 Bank Mergers

Are you an accredited investor?

Products offered by Hamilton Capital Partners Inc. have a minimum subscription amount of $150,000, unless you meet the definition of an "accredited investor" under National Instrument 45-106 Prospectus and Registration Exemptions.

If you meet the definition of an "accredited investor", you may invest a minimum of $25,000. Please consult the offering documents to determine your qualification status. Investment Advisors should consult their company's internal policies.

The Subscriber must be (and will be at the time the Subscription is executed) an accredited investor under National Instrument 45-106 Prospectus and Registration Exemptions ("NI 45-106")

Accept Decline