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Fulton Financial Corporation (FULT - Free Report) and Prudential Bancorp, Inc. have entered a merger agreement under which Prudential will merge with and into Fulton Financial. The stock and cash deal is expected to close in the third quarter of 2022, after the satisfaction of necessary closing conditions, including the receipt of customary regulatory approvals and the approval by Prudential’s shareholders.
With assets worth $26 billion, Fulton Financial provides financial services through 200 financial centers in Pennsylvania, Delaware, Maryland, New Jersey and Virginia. Then again, Prudential is the holding company of Prudential Bank, a Pennsylvania-chartered savings bank with assets of $1.1 billion.
The acquisition of Prudential is expected to accelerate Fulton Financial’s Philadelphia and urban market strategies. The deal will also provide a strategically important market for FULT’s organic growth and expansion.
Terms of the Deal and Financial Impact
Based on the 10-day volume weighted average share price of Fulton Financial’s common stock on Mar 1, the deal is valued at $142.1 million or $18.01 per Prudential’s common stock.
Nearly 80% of the total consideration will be paid through Fulton Financial’s common stock and the remaining 20% will be paid in cash.
Per the agreement, Prudential shareholders will receive 0.7974 shares of Fulton Financial’s common stock for each of their own shares held and $28 million in cash.
The transaction is expected to qualify as a tax-free exchange for shares received by Prudential shareholders.
Following the deal closure, Prudential Bank will be merged into Fulton Financial’s subsidiary, Fulton Bank, N.A.
Notably, as part of the deal, Fulton Financial will make a $2-million contribution to the Fulton Forward Foundation, designated to be used to provide impact gifts in support of non-profit community organizations in Philadelphia that are focused on advancing economic empowerment, particularly in underserved communities.
Cost savings of 45% are projected from the deal. The merger will result in pre-tax charges of $16.5 million and after-tax charges of $14 million.
The merger is expected to be 3.5% accretive to earnings per share in 2023. Based on the cross-over method, a less than 1% dilution to tangible book value with an earn-back period of 1.2 years is projected.
Management Comments
E. Philip Wenger, the chairman, president and CEO of Fulton Financial, stated, “I have shared with investors Fulton’s desire to be more active in mergers and acquisitions of companies that are a good fit for us – strategically, culturally and geographically. We look forward to working with the Prudential team to bring our mutual community-oriented style of banking, our comprehensive range of products and services, and our talented teams together to help even more customers and communities in Philadelphia achieve financial success.”
Prudential’s president and CEO, Dennis Pollack, said, “We are very pleased to join with a partner like Fulton that shares our commitment to community banking. We both have a history of placing the customer first and working to improve the lives of persons in the communities we serve. Prudential is excited to be able to offer our customers and communities a broader array of products and services.”
Over the past six months, shares of Fulton Financial have rallied 13.8%, outperforming the 11.4% growth of the industry.
Of late, regulators have come under pressure to toughen merger-approval processes after President Biden issued an executive order in July 2021, directing regulators to make adjustments to the bank merger review process in an effort to promote more competition in financial services and other sectors.
Escalating political and regulatory scrutiny of large bank mergers and acquisitions might result in higher execution risk for future deals. But this is not discouraging banks from consolidation activities.
Recently, First Horizon Corporation (FHN - Free Report) and TD Bank Group (TD - Free Report) signed a definitive agreement for TD to acquire FHN in an all-cash deal valued at $13.4 billion, or $25 for each FHN common share.
TD anticipates the FHN acquisition to close by Nov 1, 2022. The acquisition is subject to customary closing conditions, including approvals from First Horizon's shareholders, and U.S. and Canada regulatory authorities.
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Fulton Financial (FULT), Prudential Sign $142M Merger Deal
Fulton Financial Corporation (FULT - Free Report) and Prudential Bancorp, Inc. have entered a merger agreement under which Prudential will merge with and into Fulton Financial. The stock and cash deal is expected to close in the third quarter of 2022, after the satisfaction of necessary closing conditions, including the receipt of customary regulatory approvals and the approval by Prudential’s shareholders.
With assets worth $26 billion, Fulton Financial provides financial services through 200 financial centers in Pennsylvania, Delaware, Maryland, New Jersey and Virginia. Then again, Prudential is the holding company of Prudential Bank, a Pennsylvania-chartered savings bank with assets of $1.1 billion.
The acquisition of Prudential is expected to accelerate Fulton Financial’s Philadelphia and urban market strategies. The deal will also provide a strategically important market for FULT’s organic growth and expansion.
Terms of the Deal and Financial Impact
Based on the 10-day volume weighted average share price of Fulton Financial’s common stock on Mar 1, the deal is valued at $142.1 million or $18.01 per Prudential’s common stock.
Nearly 80% of the total consideration will be paid through Fulton Financial’s common stock and the remaining 20% will be paid in cash.
Per the agreement, Prudential shareholders will receive 0.7974 shares of Fulton Financial’s common stock for each of their own shares held and $28 million in cash.
The transaction is expected to qualify as a tax-free exchange for shares received by Prudential shareholders.
Following the deal closure, Prudential Bank will be merged into Fulton Financial’s subsidiary, Fulton Bank, N.A.
Notably, as part of the deal, Fulton Financial will make a $2-million contribution to the Fulton Forward Foundation, designated to be used to provide impact gifts in support of non-profit community organizations in Philadelphia that are focused on advancing economic empowerment, particularly in underserved communities.
Cost savings of 45% are projected from the deal. The merger will result in pre-tax charges of $16.5 million and after-tax charges of $14 million.
The merger is expected to be 3.5% accretive to earnings per share in 2023. Based on the cross-over method, a less than 1% dilution to tangible book value with an earn-back period of 1.2 years is projected.
Management Comments
E. Philip Wenger, the chairman, president and CEO of Fulton Financial, stated, “I have shared with investors Fulton’s desire to be more active in mergers and acquisitions of companies that are a good fit for us – strategically, culturally and geographically. We look forward to working with the Prudential team to bring our mutual community-oriented style of banking, our comprehensive range of products and services, and our talented teams together to help even more customers and communities in Philadelphia achieve financial success.”
Prudential’s president and CEO, Dennis Pollack, said, “We are very pleased to join with a partner like Fulton that shares our commitment to community banking. We both have a history of placing the customer first and working to improve the lives of persons in the communities we serve. Prudential is excited to be able to offer our customers and communities a broader array of products and services.”
Over the past six months, shares of Fulton Financial have rallied 13.8%, outperforming the 11.4% growth of the industry.
Image Source: Zacks Investment Research
Currently, FULT carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Inorganic Growth Efforts by Other Firms
Of late, regulators have come under pressure to toughen merger-approval processes after President Biden issued an executive order in July 2021, directing regulators to make adjustments to the bank merger review process in an effort to promote more competition in financial services and other sectors.
Escalating political and regulatory scrutiny of large bank mergers and acquisitions might result in higher execution risk for future deals. But this is not discouraging banks from consolidation activities.
Recently, First Horizon Corporation (FHN - Free Report) and TD Bank Group (TD - Free Report) signed a definitive agreement for TD to acquire FHN in an all-cash deal valued at $13.4 billion, or $25 for each FHN common share.
TD anticipates the FHN acquisition to close by Nov 1, 2022. The acquisition is subject to customary closing conditions, including approvals from First Horizon's shareholders, and U.S. and Canada regulatory authorities.