M&A

Fifth Third Makes Chicago Move With MB Buy

The $4.7 billion deal will create the fourth-largest bank in total deposits among the nearly 200 banks in the Chicago market.
Matthew HellerMay 22, 2018

Ohio-based regional bank Fifth Third Bancorp has agreed to acquire smaller rival MB Financial in a $4.7 billion deal that will make Chicago its largest market.

MB Financial, the parent company of MB Financial Bank, has served the Chicago market for more than 100 years, specializing in loans to middle-market businesses.

Adding Fifth Third’s 148 locations in the Chicago area to MB’s 91 branches, the combined company will have a deposit market share of 6.5%, ranking it fourth in total deposits and second in estimated retail deposits among the nearly 200 banks in the marketplace.

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Fifth Third, which has $142 billion in assets and a total of 1,153 locations in the Midwest and South, said Monday it will pay $54.20 per share in cash and stock for MB, a premium of about 24% to the undisturbed price on May 18.

“There were no other potential partners of the same caliber as MB Financial in the Chicago market,” Fifth Third CEO Greg Carmichael said in a news release, adding, “We view MB Financial as a unique partner in our efforts to build scale in this strategically important market.”

The companies project the merger will realize $255 million in net cost savings. “We have significant branch overlap,” Carmichael said during a conference call. “We’ll be able to shut down possibly 40 to 50 branches.”

MB was formed by the 2001 merger of two longstanding Chicago banks, Mid-City National Bank and Manufacturers Bank. Fifth Third entered the market with the 2000 acquisition of Old Kent Financial.

“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.”

According to Reuters, a windfall from the Republican tax overhaul has encouraged more investment among mid-sized U.S. lenders after “several years of minimal merger activity in the sector due to stricter rules set in place after the 2008 financial crisis, which limited expansion.”