The merger agreement provides that shareholders of IAB will have the right to receive 1.6530 shares of First Merchants common stock for each share of IAB common stock owned. Based on the closing price of First Merchants’ common stock on February 16, 2017 of $42.10 per share, the implied price of IAB common stock is $69.59 per share. On November 21, 2016, First Merchants purchased 495,112 shares or 12.1% of IAB’s outstanding common stock from an IAB shareholder for $19.8 million in cash. Based on the closing price of First Merchants’ common stock on February 16, 2017, the transaction value for the remaining shares of common stock, not owned by First Merchants, is approximately $251.3 million.
The transaction is expected to be completed in the third quarter of 2017, subject to the affirmative vote of IAB shareholders, regulatory approvals, and other customary conditions. The combined company, doing business as First Merchants Bank, expects to complete its integration during the fourth quarter of 2017.
First Merchants and IAB will have combined assets of $8.3 billion and will be the second largest financial holding company headquartered in Indiana. The combined company will have 122 banking offices in thirty-one Indiana counties, as well as two counties in both Ohio and Illinois.
Michael C. Rechin, President and Chief Executive Officer of First Merchants, said, “Like First Merchants, iAB has a long history and a deep-rooted commitment to community banking and we are excited for it to become the newest member of the First Merchants family. We believe that our strategy to be a service-driven alternative to our super-regional bank competitors will support the acceleration of iAB’s current initiatives while furthering our goal of growing as a high-performing company. The iAB franchise is a logical geographic extension for us given the less than 20-mile proximity of our nearest banking center locations. iAB Financial Bank’s markets in Northeast Indiana, and specifically Fort Wayne, offer outstanding growth opportunities for First Merchants in Indiana’s second largest market.”
Rechin added “We expect this combination to be mutually beneficial to First Merchants and IAB shareholders. We anticipate earnings per share accretion of approximately 2% in 2017 and approximately 5% annually over the longer term through the combination of identified expense savings of 38% plus the company’s organic growth resulting in a tangible book value earnback of 3.75 years.”
Michael C. Marhenke, iAB Financial Bank’s Chief Executive Officer and President, and William H. Thatcher III, iAB Financial Bank’s Chief Operating Officer, will be executives in First Merchants Bank’s newly acquired market, with Mr. Marhenke transitioning day-to-day management responsibilities over to Mr. Thatcher, who will assume the role of Regional President. Mr. Marhenke is expected to take on a leadership role within First Merchants that will keep him involved in the success of the merger and in the growth of First Merchants.
Mr. Marhenke stated, “We are excited about the opportunity to become part of the First Merchants family, and believe this partnership will be advantageous for our clients, shareholders and communities. For several years now, our strategic plan has been driven to be the community bank of choice in our marketplace. Our bankers look forward to expanded new product capabilities and lending capacity in continuing to build relationships with our clients as First Merchants. The core values of both companies share a commitment to local decision making, personal service, long-term relationships and community involvement.”
SunTrust Robinson Humphrey and Sandler O’Neill & Partners, L.P. served as financial advisors to First Merchants and legal advisor was Bingham Greenebaum Doll LLP.
ProBank Austin served as financial advisor to IAB in this transaction and Shumaker, Loop & Kendrick, LLP served as legal advisor to IAB.