Citizens Financial Group and Investors Bancorp entered into a definitive agreement and plan of merger under which Citizens will acquire all of the outstanding shares of Investors for a combination of stock and cash.
The acquisition of Investors will add 154 branches located in the greater New York City and Philadelphia metropolitan areas and across New Jersey to Citizens’ branch network. The acquisition follows Citizens’ recent acquisition of HSBC East Coast branches and national online deposits, which is expected to close in Q1/22.
“The acquisition of Investors, following on the heels of the acquisition of HSBC’s East Coast branches, further strengthens our formidable franchise in the Northeast, together adding roughly 1 million customers and boosting our near and long-term growth potential,” Bruce Van Saun, chairman and CEO of Citizens Financial Group, said. “We are confident in our ability to successfully integrate these acquisitions and to over time deliver the same attractive offerings to customers and strong financial performance in the New York City metro region and New Jersey as we do in other major metro areas we serve.”
“Joining Citizens, with its broad capabilities, scale and commitment to excellence in customer service, opens exciting opportunities for our combined company,” Kevin Cummings, chairman and CEO of Investors Bancorp, said. “Citizens shares Investors’ deep commitment to serving customers, supporting colleagues and giving back to local communities. Our local-market expertise and personal touch will align well with Citizens’ approach and together we will drive long-term value for all our stakeholders.”
The transaction is expected to be immediately accretive to EPS and to add approximately 6.4% to 2023 fully-diluted EPS. The Investors and HSBC acquisitions add 8.8% combined to 2023 fully-diluted EPS. The transaction is also expected to deliver an internal rate of return of more than 20% and an estimated return on invested capital of approximately 13%. In addition, the transaction is expected to improve return on tangible common equity by approximately 120 basis points and efficiency ratio by approximately 270 basis points. The transaction is further expected to be CET1 neutral at closing and to yield tangible book value per share dilution of approximately 2.6% with an approximately 2.5-year earn-back.
The transaction will lead to approximately $130 million of fully-phased in annual cost savings after provisions for adding investments in brand marketing and technology capabilities, equating to approximately 30% of Investors’ estimated 2021 cost base. The transaction will lead to total estimated pre-tax integration costs of approximately $400 million.
Under the terms of the agreement and plan of merger, Investors shareholders will receive 0.297 of a share of Citizens common stock and $1.46 in cash for each share of Investors they own. Following completion of the transaction, former Investors shareholders will collectively own approximately 14% of the combined company. The implied total transaction value based on closing prices on July 27, 2021, is approximately $3.5 billion.
Several members of Investors’ management team are expected to join Citizens. Upon closing of the transaction, Cummings and Michele N. Siekerka, who are current members of the board of directors of Investors, are expected to join Citizens’ board of directors.
The boards of directors of each company unanimously approved the agreement and plan of merger and the transaction is expected to close in either Q1/22 or Q2/22, subject to approval by the shareholders of Investors, receipt of required regulatory approvals and other customary closing conditions.
Morgan Stanley acted as financial advisor to Citizens in connection with the transaction and Sullivan & Cromwell served as legal advisor. Keefe, Bruyette & Woods served as lead financial advisor, Piper Sandler and Lazard also served as financial advisors and Luse Gorman served as legal advisor to Investors.