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Sterling Bancorp to Acquire Astoria: Will STL Stock Benefit?
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Sterling Bancorp will acquire Astoria Financial Corporation in an all-stock deal. The transaction, which is expected to close in the fourth quarter of 2017, is subject to regulatory and shareholder approval.
The merger will lead to the creation of the sixth largest regional bank in New York City in terms of deposits and is expected to have a diversified business mix, serving the needs of business owners and consumers in the city. The transaction has already been approved by the board of directors of both the companies.
Terms of the Deal
Based on the closing price of Sterling Bancorp shares on Mar 6, 2017, the deal is valued at $2.2 billion. Per the agreement, 0.875 shares of Sterling Bancorp common stock will be exchanged for each Astoria common stock.
Once the deal is closed, investors of Sterling Bancorp will hold approximately 60% shares of the combined company and Astoria shareholders will hold the remaining 40%.
Moreover, the new entity will have approximately $29 billion in assets, $20 billion in loans and $19 billion in deposits.
Financial Impact
The transaction is expected to be 12% accretive to Sterling Bancorp's tangible book value per share and 9% accretive to earnings per share in 2018, exclusive of the restructuring charge. Also, it is likely to be 16% accretive to earnings per share in 2019.
Apart from these, the merger should lead to approximately $100 million in fully phased-in annual net cost savings, which is 35% of Astoria's non-interest expenses.
In the long run, the merger is expected to create substantial value additions as Astoria's balance sheet and earning assets will be transitioned to Sterling's diversified commercial lending model.
The newly-formed company, which will operate as Sterling Bancorp, will have substantial internal capital generation for future growth and is expected to maintain a quarterly dividend of 7 cents per share – meaning 17% dividend payout ratio.
Surprisingly, following the announcement of the deal, shares of Sterling Bancorp decreased 1.4% so far.
However, in the last one year, the company’s shares have surged 61.5%, outperforming the 42.1% gain for the Zacks categorized Northeast Banks industry.
Currently, Sterling Bancorp carries a Zacks Rank #2 (Buy).
Some other stocks in the same space worth considering include First Bank (FRBA - Free Report) , Independent Bank Corp. (INDB - Free Report) and Sandy Spring Bancorp, Inc. (SASR - Free Report) .
First Bank has witnessed an upward earnings estimate revision of 1.3% for the current year, in the last 60 days. Its share price has increased 61.2% in the last six months. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Independent Bank also sports a Zacks Rank #1. For the current year, in the last 60 days, its Zacks Consensus Estimate was revised 10.4% upward. Its share price increased 22.3% in the last six months.
Sandy Spring Bancorp carries a Zacks Rank #2. It has witnessed an upward earnings estimate revision of 6.3% for the current year, in the last 60 days. Its share price increased 38.4% in the last six months.
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Sterling Bancorp to Acquire Astoria: Will STL Stock Benefit?
Sterling Bancorp will acquire Astoria Financial Corporation in an all-stock deal. The transaction, which is expected to close in the fourth quarter of 2017, is subject to regulatory and shareholder approval.
The merger will lead to the creation of the sixth largest regional bank in New York City in terms of deposits and is expected to have a diversified business mix, serving the needs of business owners and consumers in the city. The transaction has already been approved by the board of directors of both the companies.
Terms of the Deal
Based on the closing price of Sterling Bancorp shares on Mar 6, 2017, the deal is valued at $2.2 billion. Per the agreement, 0.875 shares of Sterling Bancorp common stock will be exchanged for each Astoria common stock.
Once the deal is closed, investors of Sterling Bancorp will hold approximately 60% shares of the combined company and Astoria shareholders will hold the remaining 40%.
Moreover, the new entity will have approximately $29 billion in assets, $20 billion in loans and $19 billion in deposits.
Financial Impact
The transaction is expected to be 12% accretive to Sterling Bancorp's tangible book value per share and 9% accretive to earnings per share in 2018, exclusive of the restructuring charge. Also, it is likely to be 16% accretive to earnings per share in 2019.
Apart from these, the merger should lead to approximately $100 million in fully phased-in annual net cost savings, which is 35% of Astoria's non-interest expenses.
In the long run, the merger is expected to create substantial value additions as Astoria's balance sheet and earning assets will be transitioned to Sterling's diversified commercial lending model.
The newly-formed company, which will operate as Sterling Bancorp, will have substantial internal capital generation for future growth and is expected to maintain a quarterly dividend of 7 cents per share – meaning 17% dividend payout ratio.
Surprisingly, following the announcement of the deal, shares of Sterling Bancorp decreased 1.4% so far.
However, in the last one year, the company’s shares have surged 61.5%, outperforming the 42.1% gain for the Zacks categorized Northeast Banks industry.
Currently, Sterling Bancorp carries a Zacks Rank #2 (Buy).
Some other stocks in the same space worth considering include First Bank (FRBA - Free Report) , Independent Bank Corp. (INDB - Free Report) and Sandy Spring Bancorp, Inc. (SASR - Free Report) .
First Bank has witnessed an upward earnings estimate revision of 1.3% for the current year, in the last 60 days. Its share price has increased 61.2% in the last six months. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Independent Bank also sports a Zacks Rank #1. For the current year, in the last 60 days, its Zacks Consensus Estimate was revised 10.4% upward. Its share price increased 22.3% in the last six months.
Sandy Spring Bancorp carries a Zacks Rank #2. It has witnessed an upward earnings estimate revision of 6.3% for the current year, in the last 60 days. Its share price increased 38.4% in the last six months.
8 Stocks with Huge Profit Potential
Just released: Driverless Cars: Your Roadmap to Mega-Profits Today. In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>