Fifth Third Corp to buy Chicago-based MB Financial in $4.7bn deal

Fifth Third Bancorp has agreed to buy Chicago-based MB Financial in a deal valued at around $4.7bn.

MB Financial shareholders will receive $54.20, consisting of 1.45 shares of Fifth Third common stock and $5.54 in cash for each of their shares. This represents a premium of around 24% to the closing price of MB Financial on 18 May.

Greg D. Carmichael, chairman, president and chief executive officer of Fifth Third Bancorp, said: "There were no other potential partners of the same calibre as MB Financial in the Chicago market, and we are very pleased to reach an agreement to merge our companies. We view MB Financial as a unique partner in our efforts to build scale in this strategically important market. Customers of both banks will benefit from greater convenience and the complementary capabilities that our banks, together, can offer.

"This merger also allows us to leverage MB Financial’s talented management team. That begins with the selection of Mitch Feiger as chairman and CEO for our Chicago region, and we expect it to include other key members of the MB Financial leadership team. On a combined basis, we will have the best talent in the market.

"In addition to its strategic importance, this merger is expected to drive significant financial benefits. We expect our investment to generate an IRR of approximately 18.5% and to be accretive to our operating EPS in the first year, with accretion of nearly 7% in the second year, once cost savings are fully realised. Furthermore, we not only expect the merger to accelerate our progress towards our NorthStar financial targets but also raise them above our previous guidance."

The deal is expected to reduce to reduce Fifth Third's common equity Tier 1 ratio by around 45 basis points.

MB Financial is the holding company for MB Financial Bank, N.A. It has approximately $20bn in assets with a history of successfully serving the Chicago market for more than 100 years.

The merger will result in a total Chicago deposit market share of 6.5%, ranking the combined company fourth in total deposits and second in estimated retail deposits among the nearly 200 banks in the marketplace. In addition, the combined entity will have a 20% share of middle market relationships in Chicago, ranking it second.