First Citizens Agrees to Purchase CIT Group for $2 Billion

(Bloomberg) -- First Citizens BancShares Inc. agreed to buy CIT Group Inc. in a deal valued at more than $2 billion, this year’s second-biggest regional bank merger.

The all-stock transaction will create the 19th-largest U.S. bank based on assets, the two companies said in a statement Friday. It will operate under the First Citizens name and be based in Raleigh, North Carolina.

“We have long admired CIT’s market-leading commercial business, including their strong market position across multiple asset classes,” First Citizens Chief Executive Officer Frank Holding, who will keep the CEO title after the merger, said in the statement. “CIT has made tremendous progress in reducing its cost of funds, enhancing risk-management processes and retaining key talent.”

Last year’s $28 billion combination of BB&T Corp. and SunTrust Banks Inc. was widely seen as the possible start of a new wave of mergers with the potential to build regional banks into national players. This year’s Covid-19 pandemic has reignited that speculation. William Demchak, CEO of PNC Financial Services Group Inc., said in May that he’s preparing for “opportunities that history has shown can arise in disrupted markets.”

Christopher Marinac, an analyst at Janney Montgomery Scott LLC, said the deal shows mergers can happen despite credit risks created by the pandemic “if the seller is willing to take a discount.” The agreement’s valuation for CIT is 44% of reported tangible book value, Marinac said.

“The perceived credit risk is not a blockade,” he said. “It’s just a headwind that has to be met, and it can be met with an adjusted price.”

The CIT acquisition combines First Citizens’ more than 550 branches in the southeastern and western U.S. with CIT’s Southern California branches and homeowner-association business. The deal is second only this year to South State Corp.’s $3.2 billion takeover of CenterState Bank Corp., completed in June.

Alemany’s Role

CIT CEO Ellen Alemany told investors Friday that the acquisition helps expand middle-market banking and will let the company provide a full suite of banking services beyond just the mortgage and deposit products CIT was offering in branches. Alemany, 64, will become vice chairman and serve on the board of directors.

Under the terms of the agreement, CIT shareholders will get 0.062 shares of First Citizens Class A common stock for each share of CIT common stock, according to the statement. That’s about $21.91 a share, or 11% more than Thursday’s closing price.

Shares of First Citizens climbed 11% to $393.69 at 12:02 p.m. in New York, and CIT advanced 27% to $25.12.

First Citizens shareholders will own about 61% of the combined company and CIT stockholders will own roughly 39%, the banks said. The companies are targeting earnings-per-share gains of more than 50% once cost savings are fully phased in, according to the statement.

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