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Alerus Financial (ALRS) to Buy HMN Financial for $116.4 Million
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In sync with its long-term plan to expand business segments and product suite, Alerus Financial (ALRS - Free Report) has signed an agreement to acquire HMN Financial, Inc. in an all-stock deal valued at $116.4 million. The transaction marks the 26th acquisition for the company since 2000 and is expected to close in the fourth quarter of 2024.
The deal has been approved by the boards of directors but is still subject to the approvals of shareholders of both companies as well as regulators.
Katie Lorenson, president and CEO of Alerus Financial, said, “We are pleased with this partnership and the strategic expansion into the growing and vibrant Rochester, Minnesota, market and other communities Home Federal serves. Home Federal has built a valuable core deposit franchise based on long-standing client relationships, and we believe their culture, vision, and purpose align remarkably well with ours.”
Deal to be Accretive to Alerus’ 2025 Earnings
Under the terms of the agreement, the shareholders of HMN Financial will receive 1.25 shares of ALRS for each share of HMN Financial they own.
At present, Rochester, MN-based HMN Financial, through its subsidiary Home Federal Savings Bank, operates 12 branches in Minnesota and one branch each in Iowa and Wisconsin. As of Mar 31, 2024, the company had $1.2 billion in total assets, roughly $872.3 million in loans and $1 billion in total deposits.
Following the deal closure, the combined company will have nearly $5.5 billion in total assets, $3.7 billion in total loans, $4.3 billion in total deposits, and assets under administration and management of almost $43.1 billion. It will operate through 29 locations across the Midwest and Arizona.
Alerus Financial expects the transaction to be immediately accretive to its 2025 earnings by 45% (excluding one-time expenses). Further, the deal will result in 30% cost savings on HMN Financial’s non-interest expenses. It will result in one-time transaction related pre-tax charges of $21.7 million.
Conclusion
As mentioned above, ALRS is an active acquirer, having grown strategically through acquisitions over time. The buyout of HMN Financial supports the company’s initiative to combine organic growth with inorganic expansion efforts.
The deal will not only diversify the loan portfolio but will also help bolster market share in Rochester and other Minnesota markets. Further, it will help gain exposure to other new key markets.
Over the past year, shares of Alerus Financial have gained 34.7%, outperforming the industry’s rally of 24.4%.
In the past month, UMB Financial Corporation (UMBF - Free Report) entered into a definitive merger agreement to acquire Heartland Financial, USA Inc. (HTLF - Free Report) in an all-stock transaction valued at around $2 billion.
Per the terms of the merger agreement, HTLF stockholders will receive 0.55 shares of UMBF’s common stock for each share of HTLF common stock held. This values the deal at $45.74 per share based on UMBF’s closing price of $83.17 on Apr 26, 2024
The deal is expected to result in $215 million of pre-tax one-time restructuring charges.
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Alerus Financial (ALRS) to Buy HMN Financial for $116.4 Million
In sync with its long-term plan to expand business segments and product suite, Alerus Financial (ALRS - Free Report) has signed an agreement to acquire HMN Financial, Inc. in an all-stock deal valued at $116.4 million. The transaction marks the 26th acquisition for the company since 2000 and is expected to close in the fourth quarter of 2024.
The deal has been approved by the boards of directors but is still subject to the approvals of shareholders of both companies as well as regulators.
Katie Lorenson, president and CEO of Alerus Financial, said, “We are pleased with this partnership and the strategic expansion into the growing and vibrant Rochester, Minnesota, market and other communities Home Federal serves. Home Federal has built a valuable core deposit franchise based on long-standing client relationships, and we believe their culture, vision, and purpose align remarkably well with ours.”
Deal to be Accretive to Alerus’ 2025 Earnings
Under the terms of the agreement, the shareholders of HMN Financial will receive 1.25 shares of ALRS for each share of HMN Financial they own.
At present, Rochester, MN-based HMN Financial, through its subsidiary Home Federal Savings Bank, operates 12 branches in Minnesota and one branch each in Iowa and Wisconsin. As of Mar 31, 2024, the company had $1.2 billion in total assets, roughly $872.3 million in loans and $1 billion in total deposits.
Following the deal closure, the combined company will have nearly $5.5 billion in total assets, $3.7 billion in total loans, $4.3 billion in total deposits, and assets under administration and management of almost $43.1 billion. It will operate through 29 locations across the Midwest and Arizona.
Alerus Financial expects the transaction to be immediately accretive to its 2025 earnings by 45% (excluding one-time expenses). Further, the deal will result in 30% cost savings on HMN Financial’s non-interest expenses. It will result in one-time transaction related pre-tax charges of $21.7 million.
Conclusion
As mentioned above, ALRS is an active acquirer, having grown strategically through acquisitions over time. The buyout of HMN Financial supports the company’s initiative to combine organic growth with inorganic expansion efforts.
The deal will not only diversify the loan portfolio but will also help bolster market share in Rochester and other Minnesota markets. Further, it will help gain exposure to other new key markets.
Over the past year, shares of Alerus Financial have gained 34.7%, outperforming the industry’s rally of 24.4%.
Image Source: Zacks Investment Research
Currently, Alerus Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past month, UMB Financial Corporation (UMBF - Free Report) entered into a definitive merger agreement to acquire Heartland Financial, USA Inc. (HTLF - Free Report) in an all-stock transaction valued at around $2 billion.
Per the terms of the merger agreement, HTLF stockholders will receive 0.55 shares of UMBF’s common stock for each share of HTLF common stock held. This values the deal at $45.74 per share based on UMBF’s closing price of $83.17 on Apr 26, 2024
The deal is expected to result in $215 million of pre-tax one-time restructuring charges.