Fifth Third Bancorp said Thursday it would buy First Charter for $1.1 billion to gain access to nearly 60 bank branches in the South.
Fifth Third said it would pay $31 in cash and stock for each First Charter share, a 53% premium. First Charter shares closed at $20.25 on Wednesday on Nasdaq.
Based in Charlotte, North Carolina, First Charter operates 57 branches in its home state and two more in suburban Atlanta.
That will give Cincinnati-based Fifth Third, which operates mainly in the Midwest, an entry into a fast-growth market and an additional $4.9 billion in assets.
In May, Fifth Third said it would buy the Crown Bank franchise from Puerto Rico's R&G Financial for $288 million to expand in Florida. Fifth Third entered Florida in 2005 when it bought First National Bankshares for $1.5 billion.
Savings in Two Years
The First Charter deal, expected to close in the first quarter of next year, will decrease Fifth Third's earnings per share by about 2%. But in 2009, the acquisition should add to profits modestly when excluding amortization of intangibles, the company said.
The purchase price for First Charter represents a multiple of about 2.4 times its book value and a core deposit premium of about 32%, Fifth Third said.
First Charter Chief Executive Bob James will join Fifth Third as president of the Charlotte affiliate. Fifth Third said it expects the acquisition to generate $35 million a year in pre-tax savings, phased in over two years. But there will be a one-time pre-tax charge of $61 million against earnings for staff training, retention and severance pay and other items.
Fifth Third said it was advised on the deal by former Bank of America Chairman Hugh McColl Jr. and Goldman Sachs.