Old National merges with First Midwest Bank

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A bank with West Michigan locations is merging with First Midwest Bancorp to create a new entity with $45 billion in combined assets.

Evansville, Indiana-based Old National Bancorp (Nasdaq: ONB) and Chicago-based First Midwest Bancorp (Nasdaq: FMBI), said on Tuesday that they entered into a definitive merger agreement to combine in an all-stock merger of equals transaction with a total market value of $6.5 billion to create a premier Midwestern bank with $45 billion in combined assets.

The transaction is expected to close in late 2021 or early 2022 subject to customary closing conditions, including regulatory and shareholder approvals.

Under the terms of the merger agreement, which has been unanimously approved by the boards of directors of both companies, First Midwest stockholders will receive 1.1336 shares of Old National common stock for each share of First Midwest common stock they own. Following completion of the transaction, former First Midwest stockholders are expected to collectively represent about 44% of the combined company.

The new organization will operate under the Old National Bancorp and Old National Bank names with dual headquarters in Evansville, Indiana, and Chicago.

Jim Ryan, chair and CEO of Old National Bancorp, will be CEO of the combined entity.

“First Midwest’s leadership team and colleagues not only mirror the Old National mission, values and culture, they also offer exceptional consumer and commercial banking services,” Ryan said. “We are confident that the powerful synergies, additional market coverage and financial strength this partnership creates will drive long-term shareholder value, and we are excited about combining the outstanding legacies of two strong, client- and community-focused organizations.”

Michael Scudder, chair and CEO of First Midwest Bancorp, will serve as the executive chair of the combined entity.

“First Midwest and Old National are two relationship-focused financial institutions that have rich histories, extremely compatible cultures and a shared commitment to helping our clients achieve financial success,” Scudder said. “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.”

Additional leadership positions for the combined entity:

  • Mark Sander, president and COO (First Midwest)
  • Jim Sandgren, CEO of commercial banking (Old National)
  • Brendon Falconer, CFO (Old National)
  • Kendra Vanzo, chief administrative officer (Old National)
  • Kevin Geoghegan, chief credit officer (First Midwest)
  • Thomas Prame, CEO of community banking (First Midwest)
  • Chady AlAhmar, CEO of wealth management (Old National)

The complete executive leadership team is expected to be announced prior to close.

The board of directors of the combined company will have 16 directors, consisting of eight directors from Old National and eight from First Midwest. Becky Skillman, lead independent director for Old National, will retain this position in the combined company.

Benefits to shareholders

  • Significant earnings per share accretion to both companies in 2022: about 22% GAAP EPS accretion to Old National and about 35% GAAP EPS accretion to First Midwest, assuming fully phased in cost savings and excluding merger charges.
  • Top quartile pro forma profitability: The combined company is expected to generate an ROATCE of about 15% in 2022, assuming fully phased in cost savings.
  • Modest tangible book value per share earnback: About 3.2 years under the crossover method.

Advisors on the transaction

Keefe, Bruyette & Woods served as exclusive financial adviser and Squire Patton Boggs (U.S.) acted as legal adviser to Old National.

J.P. Morgan Securities served as exclusive financial adviser and Sullivan & Cromwell acted as legal adviser to First Midwest.

Old National

Founded in Evansville in 1834, Old National Bancorp, the holding company of Old National Bank, is the largest bank holding company headquartered in Indiana with $23.7 billion in assets.

Its footprint includes branches in Indiana, Illinois, Kentucky, Michigan (including Grand Rapids and Cascade Township), Minnesota and Wisconsin.

In addition to providing retail and commercial banking services, Old National offers wealth management, investment and capital market services.

First Midwest

Founded in 1982, First Midwest is one of the largest independent, publicly traded bank holding companies headquartered in Chicago, with about $21 billion in assets and an additional $14 billion of assets under management.

First Midwest Bank and the institution’s other affiliates provide commercial, treasury management, equipment leasing, consumer, wealth management, trust and private banking products and services.

The bank has locations in metropolitan Chicago, southeast Wisconsin, northwest Indiana, central and western Illinois and eastern Iowa.

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