First Citizens BancShares Inc.
said Friday that it plans to buy CIT Group Inc.
in a total share to a value of approx. 2.2 billion $.
The combination of First Citizens, based in Raleigh, NC and CIT, based in New York City, would create one of the larger regional banks in the United States with more than $ 100 billion in assets. The company will retain First Citizen’s name and ticker symbol after the merger and will continue to be operated by First Citizen’s CEO.
The combination would be one of the major bank bonds in recent years. Two major regional banks, BB&T TFC -1
and SunTrust, merged last year to become Truist Financial Corp., the largest banking deal since the financial crisis heralded stricter rules.
Regional lenders are struggling to compete with major national banks like JPMorgan Chase & Co. and Bank of America Corp., which has raked deposits by attracting customers with flashy apps and ubiquitous branches. Low interest rates have offset the bank surplus, especially the regional banks, which are more dependent on traditional lending than their larger competitors.
At first blush, the mating seems strange. CIT operates a national commercial lending and leasing of equipment. First Citizens, run by the same North Carolina family for three generations, operates more than 500 branches in 19 states.
The merger will give Commercial lending activities a boost through First Citizens’ cheap deposits, which can replace more expensive financing.
“It’s an excellent strategic combination because you are marrying a really solid deposit franchise with a bank that has always struggled to find a good financing base,” said Abbott Cooper, founder of Driver Management, a bank-focused investment management firm.
First Citizens shares rose 7% at morning trading to $ 377.65. CIT shares rose 20% to $ 24.05.
CIT shareholders receive 0.062 shares in First Citizens Class A shares for each share in CIT ordinary shares and value them at approx. $ 21.91 based on Thursday’s closing prices. That is a premium of 11% compared to where CIT shares closed on Thursday.
First Citizen’s shareholders will own approximately 61% of the combined company, and CIT shareholders will own the remaining 39%.
The chairman and CEO of the combined company is Frank Holding Jr., who currently holds these roles at First Citizens. Ellen Alemany, President and CEO of CIT, will become Vice President.
CIT Group also owns OneWest, a retail bank formerly run by Steven Mnuchin, now the Treasury Department. OneWest was set up during the financial crisis when a consortium led by Mr. Mnuchin bought the failed lender IndyMac. Although the group revived the bank’s fortunes, it was criticized for excluding many borrowers.
CIT reported a 40% drop in third-quarter earnings on Friday from the previous year. First Citizens reported a 14% increase in profits.
The deal is expected to close in the first half of next year.
—Matt Grossman contributed to this article.
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