Old National Bancorp and First Midwest Bancorp plan to merge into a single entity that will go forward under the Old National brand.
Indiana-based Old National and Chicago-based First Midwest say the combined bank would be the sixth largest in the Midwest by asset size. The two banks are currently the 10th and 11th largest respectively.
The combined bank would have ninth largest market share by deposits in metro Milwaukee and in the state of Wisconsin. As of June 30, 2020, Old National had the 15th largest deposit total in the state at $1.39 billion and First Midwest was 19th at $1.12 billion.
Jim Ryan, chairman and chief executive officer of Old National, said the deal will bring together two strong, like-minded institutions and Michael Scudder, chairman and CEO of First Midwest, said the combination would be a premier Midwest bank.
“As a combined organization, we will be in an even stronger position to invest, grow and innovate in talent, capabilities and services that will enhance an already superior client experience and further set us apart as a market leader not only in Chicago but across the Midwest,” Scudder said.
The companies pointed out they have little overlap in their service areas, although the Milwaukee area is one area where both have a presence. Old National entered the Milwaukee market in 2016 with the acquisition of AnchorBank. First Midwest significantly expanded its Milwaukee presence in recent years with acquisitions of Northern Oak Wealth Management and Park Bank.
But it doesn’t appear the banks plan to sell off any of their branches in overlapping markets.
“We need as many people out interfacing with clients as possible, so we don’t think there’s any need to do anything different than what we’re doing today,” Ryan said.
Dave Werner, executive vice president and market president for southern Wisconsin at First Midwest, said the bank has been focused on market expansion in Wisconsin since it made the two acquisitions.
"Our teaming up with Old National Bank helps us accelerate that expansion," Werner said in an email. "The combination of two excellent teams allows us to better serve our existing clients and the communities in which we operate today while also looking for further expansion opportunities in the State of Wisconsin.”
Executives described the deal as a “merger of equals” although First Midwest will become part of Old National in the deal. First Midwest shareholders will receive 1.1336 shares of Old National stock for each First Midwest share they own.
The fixed exchange ratio puts the deal’s value at around $2.5 billion based on Old National’s closing price on Friday.
Old National’s shareholders will own around 56% of the company when the deal is complete and First Midwest shareholders will own 44%.
Scrudder will be the company’s executive chairman with Ryan serving as CEO. The remainder of the executive team will be a balanced mix from both banks.
The combined entity’s board will be made up eight members each from Old National and First Midwest. Becky Skillman, currently the lead independent director for Old National, will continue in that role.
The deal is expected to close in late 2021 or early 2022. The companies anticipate around $181 million in one-time merger expenses.
Executives said they have identified around $109 million in annual expense savings that could be realized from the deal. They expect to realize about 75% of that amount in 2022 and the full total starting in 2023.
The banks also expect to generate revenue synergies from the deal, but did not incorporate any into their modeling of the transaction.