Huntington Bancshares, Inc. (HBAN) Falls On Buyout of Rival Bank
Shares of Columbus, Ohio, based Huntington Bancshares, Inc. (HBAN) fell on Tuesday, against the backrop of a higher day in stocks overall. Huntington's stock was down 8.52%, falling 75 cents per share, to close at $8.02, on volume of 88,356,085 shares. Stockholders gave a negative response to Tuesday's disclosure of the acquisition of Akron, Ohio, based First Merit (FMER), a bank that operates in many of the same markets as Huntington.
Founded in 1966, Huntington Bancshares, Inc. is a regional bank holding company, with $70.8 billion in assets and more than 750 branches in Ohio, Michigan, Pennsylvania, Kentucky and West Virginia. Its primary subsidiary is The Huntington National Bank. It provides full-service commercial, small business, consumer, and mortgage banking services, as well as automobile financing, equipment leasing, investment management, trust services, brokerage services, insurance programs, and other financial products and services. The company's stock trades on the NASDAQ.
On Tuesday the two companies announced the Huntington buyout of FirstMerit, which will create the largest bank in Ohio. FirstMerit shareholders will receive 1.72 shares of Huntington stock and $5 cash for each share of FirstMerit stock they own. Based on the closing price of FirstMerit stock as of Tuesday's market close, the combination will work out to be $18.67 per share. That puts the total value of the acquisition at $3.4 billion. The transaction is expected to be completed sometime in the third quarter of 2016.
FirstMerit has $25.5 billion in assets and nearly 370 branches in Ohio, Pennsylvania, Michigan, Illinois and Wisconsin. In contrast with Huntington's stock price, FirstMerit's stock reacted positively to the news of the buyout, closing up 18.35%, adding $2.82 per share, to settle at $18.19 on the day.
The combination will create a bank with nearly $100 billion in assets, and expand Huntington's market into Illinois and Wisconsin. Huntington posted record earnings in 2015, with a 10% increase in net income and 13% in per share earnings. Meanwhile, FirstMerit posted it's 67th consecutive quarterly profit. The combination is expected to serve the banking needs of consumers and small- and middle-market businesses in the eight state market region.
“We are very pleased to come together with FirstMerit to create a regional bank with added customer convenience, an enhanced portfolio of products for consumers and businesses, as well as strong market share. I believe the strength of this deal is that both organizations already understand the needs and goals of our Midwestern customers and communities. Our combined track records of service excellence and efficient financial management will add value for our collective shareholders, customers, communities, and colleagues,” said Steve Steinour, Huntington chairman, president, and CEO.
“Joining forces with Huntington will give us an opportunity to combine both companies’ commercial, small business, wealth, and consumer expertise while giving all of our customers greater access to services. We will also leverage our strong credit culture and continue our mutual tradition of community involvement to help our Midwest markets grow," said Paul Greig, FirstMerit chairman, president, and CEO.
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