Huntington’s $22B Merger with TCF

Authored by Xueyiting Wang, King’s College London

Overview of the deal

Acquirer: Huntington Bank

Target: TCF Bank

Estimated Value: $22 billion

Announced Date: 13th December 2020

Closed Date: 9th June 2021

Transaction Advisor(s):

Goldman Sachs & Co. LLC is serving as financial advisor to Huntington. Wachtell, Lipton, Rosen & Katz is serving as legal advisor to Huntington.

Keefe, Bruyette & Woods, a Stifel Company, is serving as financial advisor to TCF. Simpson Thacher & Bartlett LLP is serving as legal advisor to TCF.

Huntington and TCF proposed a deal in 2020 and closed the deal in June 2021. TCF eventually merged with Huntington in an all-stock deal for $22 billion. Based on the balance on 31 March 2020, the combined company has approximately US$175 billion in assets, US$142 billion in deposits, and US$116 billion in loans.

“This merger combines the best of both companies and provides the scale and resources to drive increased long-term shareholder value. Huntington is focused on accelerating digital investments to further enhance our award-winning people-first, digitally powered customer experience,” Steinour said. “We look forward to welcoming the TCF Team Members. Together we will have a stronger company better able to support our customers and drive economic growth in the communities we serve.”

Company details

Company details-Acquirer- Huntington

Founded in 1866, The Huntington National Bank and its affiliates provide consumer, small business, commercial, treasury management, wealth management, brokerage, trust, and insurance services. Huntington also provides vehicle finance, equipment finance, national settlement, and capital market services that extend beyond its core states.

Credits: Huntington

CEO: Stephen Steinour

Number of employees: 25,693 (2021)

Market cap: $21.99 Billion

EV: $18 B

LTM Revenue: $5.135 B

LTM EV/Revenue: 3.84x

LTM EV/EBITDA: N/A

Company details- Target- TCF

TCF Financial Corporation (Nasdaq: TCF) is a Detroit, Michigan-based financial holding company with $48 billion in total assets at Sept. 30, 2020 and a top 10 deposit market share in the Midwest. TCF’s primary banking subsidiary, TCF National Bank, is a premier Midwest bank offering consumer and commercial banking, trust and wealth management, and specialty leasing and lending products and services to consumers, small businesses, and commercial clients. 

Credits: TCF Bank

CEO:  Thomas Shafer

Number of employees: 10,000 (2021)

Market cap: $6.89 Billion

EV: N/A

LTM Revenues:$2.00 B

LTM EV/Revenues: N/A

LTM EV/EBITDA: N/A

Projections and Assumptions

Short-term consequences

The combined company enhanced profitability and scale. The company has significantly increased its market capitalisation and enterprise value. As the company’s business is more extensive, the company will have more customers in the market. Thereby achieving revenue growth.

The merger brings significant cost synergies. the combined company is estimated to generate cost savings of approximately US$490 million or 37% of TCF’s non-interest expenses. The merger brings benefits to both companies from a cost perspective. The cost savings are available as cash flow for expansion and investment in other businesses.

Long-term upsides

The merger allows the combined company to present a new image to its customers. Not only do they have a greater variety of business, but they are also able to combine the strengths of the two original companies to bring the most satisfying service to their clients. The merged company has increased its competitiveness in the market.

The company’s share price rose sharply when it was first merged, driven by a variety of factors. In the long term, the share price of the bank will rise slowly and consistently. The bank will have stable annual earnings and there is a significant upside in earnings.

Risks and uncertainties

  • The size and duration of the COVID-19 pandemic and its impact on global economic and financial market conditions.

There is no denying that the impact of the epidemic on the global economy has been enormous. Banks’ earnings will fluctuate because of the epidemic. This is a major uncertainty. Now that the epidemic has been normalised, people are spending less, and money tends to be deposited in banks. If the combined company wants to be more competitive, it needs to try to introduce new financial products that will attract more customers.

  • Uncertainty regarding U.S. fiscal and monetary policies, including the fiscal policies of the U.S. government.

This uncertainty could affect the commercial development of the merged bank. Also, the results of operations and financial conditions should be considered. The company needs to find its certainty in uncertainty so that it is prepared to face any problems that may arise at any time.

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