NEW YORK -- Fifth Third Bancorp is buying Chicago's MB Financial for about $4.7 billion, mostly in stock.
MB Financial Inc., the parent company of MB Financial Bank, has approximately $20 billion in assets.
In a conference call with Wall Street analysts, Fifth Third said the acquisition will enable it to leapfrog five other rivals in retail deposits and market share in a city that holds great potential for growth in commercial lending.
“If you add up the opportunities in four of our largest Southeast markets, it doesn’t match the opportunity in middle-market relationships in the Chicago market,” said Fifth Third CEO Greg Carmichael. “So it’s a big market that really fits into our commercial business and the area that we want to get more focused on.”
Fifth Third entered the Chicago market with the 2001 acquisition of Old Kent Financial Corp. Eighteen years later, it holds a 5 percent market share -- well behind first-ranked JP Morgan Chase at 24.7 percent.
Fifth Third and MB Financial have a combined 239 branches, but many of them are within a few miles of each other. So, Fifth Third expects to close 40 to 50 branches post merger, part of a cost-cutting effort that it expects will save about $255 million annually. But the two banks also have complementary business lines that should provide room for growth.
“We expect the products and advisory services we offer in our capital markets business to be extremely valuable to MB's current commercial client base,” said Fifth Third Chief Financial Officer Tayfun Tuzun. “The combination of MB's commercial banking universe and our wealth management business will create a very powerful growth engine in Chicago.”
MB Financial shareholders will receive the equivalent of $54.20, or 1.45 shares of Fifth Third common stock and $5.54 in cash for each share of MB Financial common stock. The offer is a 24 percent premium to MB's closing share price Friday.
Shares of MB Financial jumped almost 9 percent before the opening bell. Shares of Fifth Third, based in Cincinnati, were down more than 7 percent to $31.07 within a half hour of the opening bell.