Huntington Bancshares to acquire TCF Financial for £4.5 billion in stock

Huntington Bancshares Inc (NASDAQ: HBAN) said on Sunday that it will buy TCF Financial Corp. (NASDAQ: TCF) for £4.50 billion. The new company, after the completion of the all-stock deal, will have a market value of £16.49 billion.

TCF Financial jumped about 7% in premarket trading on Monday but lost roughly half of its intraday gain on market open. Its shares are now exchanging hands at £27 per share versus a sharply lower £13.76 per share in mid-March when the ongoing Coronavirus pandemic weighed on the global financial sector.

In comparison, the Detroit-based bank holding company had a per-share price of £35.31 at the start of the year.

Huntington says merger will boost per-share earnings by 18%

The agreement between the two U.S. regional lenders will establish a joint holding company along with a bank that will operate under Huntington’s name. According to Huntington, the merger will boost its per-share earnings by 18% in 2022.

In an attempt to pose a serious competition to the bigger fish, including Wells Fargo and JPMorgan, regional U.S. lenders have recently been focusing increasingly on mergers and acquisitions and take advantage of the lower corporate taxes and software financial regulations under the Trump administration.

In an announcement last month, Spain’s BBVA struck an £8.70 billion cash deal to offload its business in the United States to PNC Financial Services Group Inc. The agreement marked one of the largest for the banking sector from across the globe this year.

In terms of market capitalisation, Huntington Bancshares is a significantly bigger company than TCF Financial. The former is valued at £9.47 billion while the latter at £4.19 billion.

The deal is likely to close next year in the second quarter

The announcement on Sunday also highlighted that the joint company will have assets worth roughly £126 billion. It will value deposits at £100.45 billion and loans at £87.70 billion. The deal is likely to close next year in the second quarter.

CEO Stephen Steinour of Huntington will serve as the CEO, president, and the chairman of the new holding company.

Huntington’s shares are currently about 5% down on the daily chart. On a year-to-date basis, the stock is more than 15% down despite an over 75% growth since its low in the first week of April. At the time of writing, the Columbus-based bank holding company has a price to earnings ratio of 17.31.