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ONB to Expand Midwest Presence With $1.4B Bremer Acquisition, Stock Up
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Shares of Old National Bancorp. (ONB - Free Report) rose 6% on Monday, hitting a new 52-week high of $23.76 as the bank announced its decision to acquire Bremer Financial Corp. (“Bremer”). The transaction is valued at $1.4 billion. The consideration will be paid through 50 million shares of ONB and $315 million in cash.
Details of the Acquisition Pursued by Old National Bancorp.
Per the agreement, Old National Bancorp will pay $26.22 per share in cash with a fixed exchange ratio of 4.182 ONB shares for each share of Bremer. The merger agreement has been approved by the board of directors of both entities.
The deal is anticipated to be completed in mid-2025, subject to requisite regulatory approvals and the approval of Bremer’s shareholders. Upon closure, Bremer will be merged with ONB.
St. Paul, MN-based Bremer operates 70 branches across Minnesota, Wisconsin and North Dakota. As of Sept. 30, 2024, the firm had roughly $16.2 billion in assets, $11.5 billion in total loans and $13.2 billion in deposits.
Otto Bremer Trust owns an 86% stake in Bremer. Upon the deal completion, the trust will have roughly 11% stake in ONB and a trustee of the Trust will join Old National Bancorp’s board.
The combined entity is anticipated to have roughly $70 billion in total assets, $45.6 billion in total loans and $54.1 billion in total deposits.
ONB’s Rationale Behind the Acquisition
This transaction is likely to improve ONB’s deposit mix through low-cost and granular deposits. It will also establish the company as the premier regional bank in the Midwest, deepening its footprint in lucrative markets. The deal will meaningfully expand wealth management and contribute to high-value and lower-volatility revenues.
Jim Ryan, chairman and CEO of Old National Bancorp, stated, “This partnership represents an outstanding fit between two highly compatible, relationship- and community focused banks.”
ONB will likely benefit from expected cost-savings of 30% of Bremer’s 2025 non-interest expense, 25% of which will be phased in 2025, and the rest will be realized thereafter. Also, roughly $194 million of one-time pre-tax merger expenses will be incurred.
The deal is anticipated to be roughly 22% accretive to ONB’s 2026 earnings per share, assuming the execution of cost savings. Further, the company projects a roughly 160 basis points improvement in common equity tier 1 capital by 2026 year-end and a 20% internal rate of return.
Also, tangible book value is expected to dilute by 10% with a projected earn-back period of approximately two years. Further, ONB projects roughly 18.4% return on average tangible common equity and 1.3% return on average assets, alongside an efficiency ratio of 49% by 2026-end, adjusting for the phased-in cost savings.
This move aligns with the company’s inorganic growth strategy. ONB has successfully acquired and integrated nine banks over the last 10 years, reflecting its emphasis on strategic buyouts to expand its presence and capitalize on revenue and cost synergies.
ONB’s Zacks Rank & Price Performance
Year to date, shares of Old National have risen 35.8% compared with the industry’s growth of 35.2%.
Last week, Moody’s (MCO - Free Report) announced the acquisition of Numerated Growth Technologies, a cutting-edge loan origination platform for financial institutions. This strategic move enhances Moody’s Lending Suite, delivering a robust end-to-end loan origination and monitoring solution for banking clients.
This acquisition builds on a partnership initiated in January 2024, in which Numerated’s technologies were integrated with MCO’s expertise in credit assessment and underwriting. The collaboration offered clients a unified platform for front office, decisioning and loan operation tasks, a functionality now set to expand further.
Similarly, Robinhood Markets (HOOD - Free Report) announced an expansion strategy with the $300 million acquisition of TradePMR, a custodial and portfolio management platform specializing in services for Registered Investment Advisors.
With this stock and cash deal expected to close in the first half of 2025, HOOD is signaling a significant shift from a retail trading platform to a diversified financial services provider.
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ONB to Expand Midwest Presence With $1.4B Bremer Acquisition, Stock Up
Shares of Old National Bancorp. (ONB - Free Report) rose 6% on Monday, hitting a new 52-week high of $23.76 as the bank announced its decision to acquire Bremer Financial Corp. (“Bremer”). The transaction is valued at $1.4 billion. The consideration will be paid through 50 million shares of ONB and $315 million in cash.
Details of the Acquisition Pursued by Old National Bancorp.
Per the agreement, Old National Bancorp will pay $26.22 per share in cash with a fixed exchange ratio of 4.182 ONB shares for each share of Bremer. The merger agreement has been approved by the board of directors of both entities.
The deal is anticipated to be completed in mid-2025, subject to requisite regulatory approvals and the approval of Bremer’s shareholders. Upon closure, Bremer will be merged with ONB.
St. Paul, MN-based Bremer operates 70 branches across Minnesota, Wisconsin and North Dakota. As of Sept. 30, 2024, the firm had roughly $16.2 billion in assets, $11.5 billion in total loans and $13.2 billion in deposits.
Otto Bremer Trust owns an 86% stake in Bremer. Upon the deal completion, the trust will have roughly 11% stake in ONB and a trustee of the Trust will join Old National Bancorp’s board.
The combined entity is anticipated to have roughly $70 billion in total assets, $45.6 billion in total loans and $54.1 billion in total deposits.
ONB’s Rationale Behind the Acquisition
This transaction is likely to improve ONB’s deposit mix through low-cost and granular deposits. It will also establish the company as the premier regional bank in the Midwest, deepening its footprint in lucrative markets. The deal will meaningfully expand wealth management and contribute to high-value and lower-volatility revenues.
Jim Ryan, chairman and CEO of Old National Bancorp, stated, “This partnership represents an outstanding fit between two highly compatible, relationship- and community focused banks.”
ONB will likely benefit from expected cost-savings of 30% of Bremer’s 2025 non-interest expense, 25% of which will be phased in 2025, and the rest will be realized thereafter. Also, roughly $194 million of one-time pre-tax merger expenses will be incurred.
The deal is anticipated to be roughly 22% accretive to ONB’s 2026 earnings per share, assuming the execution of cost savings. Further, the company projects a roughly 160 basis points improvement in common equity tier 1 capital by 2026 year-end and a 20% internal rate of return.
Also, tangible book value is expected to dilute by 10% with a projected earn-back period of approximately two years. Further, ONB projects roughly 18.4% return on average tangible common equity and 1.3% return on average assets, alongside an efficiency ratio of 49% by 2026-end, adjusting for the phased-in cost savings.
This move aligns with the company’s inorganic growth strategy. ONB has successfully acquired and integrated nine banks over the last 10 years, reflecting its emphasis on strategic buyouts to expand its presence and capitalize on revenue and cost synergies.
ONB’s Zacks Rank & Price Performance
Year to date, shares of Old National have risen 35.8% compared with the industry’s growth of 35.2%.
Image Source: Zacks Investment Research
Currently, ONB carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Similar Steps by Other Finance Firms
Last week, Moody’s (MCO - Free Report) announced the acquisition of Numerated Growth Technologies, a cutting-edge loan origination platform for financial institutions. This strategic move enhances Moody’s Lending Suite, delivering a robust end-to-end loan origination and monitoring solution for banking clients.
This acquisition builds on a partnership initiated in January 2024, in which Numerated’s technologies were integrated with MCO’s expertise in credit assessment and underwriting. The collaboration offered clients a unified platform for front office, decisioning and loan operation tasks, a functionality now set to expand further.
Similarly, Robinhood Markets (HOOD - Free Report) announced an expansion strategy with the $300 million acquisition of TradePMR, a custodial and portfolio management platform specializing in services for Registered Investment Advisors.
With this stock and cash deal expected to close in the first half of 2025, HOOD is signaling a significant shift from a retail trading platform to a diversified financial services provider.