September 13, 2012

FirstMerit Corp said it would buy Citizens Republic Bancorp in an all-stock deal, valued at about $952 million, to expand its footprint into Michigan and Wisconsin.

The deal is the second large-bank merger in less than a month. M&T Bank agreed to buy Hudson City Bancorp for $3.7 billion late last month, in what was the biggest bank acquisition of the year.

Citizens Republic had reportedly been exploring options, including a possible sale, and analysts had named banks including Huntington Bancshares and Fifth Third Bancorp as potential buyers.

Analysts have been arguing for years that the 7,300 U.S. banks are ripe for consolidation. But the pace of consolidation since the 2008 financial crisis has been disappointing and deal volume this year has declined by more than a quarter from a year earlier, according to Thomson Reuters data.

Citizens Republic shareholders will receive 1.37 FirstMerit shares for each share they tender to the offering.

Based on FirstMerit's Wednesday close, the Ohio-based bank is paying $23.51 for each Citizen share, a premium of 18 percent.

FirstMerit also expects to repay the $345 million, including $45 million of estimated deferred dividends, that Citizens received from the U.S. Treasury.

"With a five-state reach that will extend from Western Pennsylvania to Wisconsin, FirstMerit looks to become the bank of choice among businesses and individuals across the upper Midwest," FirstMerit Chief Executive Paul Greig said in a statement.

The combined bank will have total assets of more than $24 billion. The deal is expected to add significantly to earnings per share from 2014, FirstMerit said.

Citizens Republic's shares were up 8 percent before the bell. They closed at $19.87 on the Nasdaq on Wednesday.

FirstMerit's shares was down 6 percent premarket. The stock closed at $17.16 on the Nasdaq on Wednesday.

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