MB Financial Bank has long touted its deep Chicago roots while branding its primarily commercial customer base with the ubiquitous slogan, “MB means business.”
The MB name and local ownership soon may be a thing of the past, after the Chicago-based bank agreed to a $4.7 billion merger with the larger Cincinnati-based Fifth Third Bancorp. The deal, announced Monday, also would lead to the closure of dozens of bank branches as the institutions combine operations.
The merger, if approved, would create the fourth-largest Chicago bank in total deposits, with a 6.5 percent market share, and give the combined company 20 percent of the city’s “middle-market” commercial banking relationships. MB branches would take the Fifth Third Bank name.
“With this transaction we’ll be adding significant scale to our operations in an attractive Chicago market and creating a top-tier middle-market lender,” Greg Carmichael, president and CEO of Fifth Third, said Monday during a conference call.
Carmichael also cited substantial cost savings to be realized through the merger, in part by closing up to 50 branches in overlapping areas within about two years.
Initially, there would be 239 Chicago-area branches with $25.4 billion in combined deposits, Fifth Third spokesman Andrew Hayes said. This would rank the merged bank fourth in total deposits and second in retail deposits in the Chicago market.
The transaction is 90 percent stock, with the balance to be paid in cash. Shareholders of MB Financial would receive $54.20 a share in total consideration, consisting of 1.45 shares of Fifth Third stock and $5.54 in cash for each share of MB Financial stock. That represents a premium of about 24 percent over MB Financial’s closing price of $43.65 a share on Friday.
Shares in MB Financial shot up nearly 13 percent on the news Monday to close at $49.28. Fifth Third’s shares dropped nearly 8 percent to close at $30.90.
MB Financial’s president and CEO, Mitch Feiger, was named CEO of the Chicago region for the combined bank.
Feiger called the merger a great fit, allowing the combined bank to make larger commercial loans to bigger clients. The scale also would allow the bank to keep pace with technological advances in the industry, he said.
“We’re always thinking about the investments we need to make in technology and the race that we face against larger companies to provide the products and services our clients demand and deserve,” Feiger said during the call. “When you look out in the future, the cost of doing that is very significant. It was definitely a factor.”
Two members of MB Financial’s board are expected to join Fifth Third’s board, the companies said.
Fifth Third has 148 locations in the Chicago area, and MB has 91. The merger would create a projected $255 million in net cost savings through reducing MB Financial’s expense base by 45 percent and closing 1 in 5 proximate branches of the combined bank.
“We have significant branch overlap,” Carmichael said during the conference call. “We’ll be able to shut down possibly 40 to 50 branches.”
Carmichael said in a subsequent interview that the bank would use analytics to determine which locations to close.
“In some cases, they’re right across the street from each other,” Carmichael said. “We’ll pick the best one and move forward.”
A bank spokesman said it was too early to offer guidance on any potential job reductions as a result of the merger.
“At this time, we do not know,” said Larry Magnesen, a Fifth Third spokesman. “We have a lot to work through to understand what the combined entity will look like.”
The cost savings are expected to be fully realized by 2020.
A closing date has not been determined, and the deal will require regulatory and shareholder approval.
With a history in Chicago stretching back more than a century, MB Financial has about $20 billion in assets.
Fifth Third entered the local market with the 2000 acquisition of Old Kent Financial. The company has $142 billion in assets and 1,153 banking locations in the Midwest and South.
Carmichael said the MB acquisition would give Fifth Third retail scale in its largest banking market, putting it behind only JPMorgan Chase in total branches, deposits and market share.
It also would help Fifth Third get smaller in a sense, he said, bolstering its middle-market lending capabilities, an area of increased commercial focus for Fifth Third.
“MB Financial does a fantastic job at the lower end of middle market, and we do a good job when you start to go upstream to (the) upper end of middle market,” Carmichael said. “So you put these organizations together, it really serves the complete commercial market opportunity.”
MB Financial was formed by the 2001 merger of two longstanding local banks, Mid-City National Bank and Manufacturers Bank. Mid-City was founded in 1911, while Manufacturers opened in 1934. Both served middle-market businesses, making MB Financial a major player in that commercial banking niche.
The bank has since built up substantial brand equity in Chicago with its heavily advertised “MB means business” slogan and its high-profile sponsorships, such as the long-term naming rights deal struck last fall for the Chicago Blackhawks’ new $65 million practice rink.
The MB Ice Arena also likely would take the Fifth Third moniker once the merger is approved.
“We need to speak with the Blackhawks about it, but I’m sure it will,” Feiger said.
Losing the MB name, however, would not necessarily cost the bank any business, he said, opening doors to new clients while its bankers look to preserve relationships with old ones.
“Brand equity is essentially how the marketplace and our clients think about us,” Feiger said. “If we’re able to maintain that goodwill and transfer it with us to Fifth Third, it will be fine. And that’s what we’re going to do.”
While the MB merger would make Chicago the largest banking market with the most locations for Fifth Third, there are no plans to make it the corporate headquarters anytime soon, Carmichael said.
“We’ve been in Cincinnati for 160 years,” he said. “We’re in a good place today, and that’s kind of how we’re thinking about it.”
Twitter @RobertChannick
