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Synovus-FCB Financial's Deal Overcomes Hurdle to Completion

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Recently, Synovus Financial Corp. (SNV - Free Report) received regulatory nod from the Federal Reserve Board, and the Georgia Department of Banking and Finance for the completion of its merger with FCB Financial Holdings, Inc. , as jointly announced by both companies. Notably, the deal was announced in July 2018.

The buyout is likely to be completed by Jan 1, 2019, subject to certain customary closing conditions, following which systems, customers, branches and branding of FCB are expected to be transitioned into Synovus by the second quarter of 2019.

“Regulatory approval is the final significant milestone in the merger of FCB and Synovus, and I am proud of the way our respective teams have worked together since the announcement of this transaction,” said Kessel Stelling, Synovus chairman and CEO. “I am confident our combined companies will continue to meet our commitments to customers, communities, and shareholders while also achieving the growth and financial objectives of the FCB acquisition,” Stelling further noted.

Background

The all-stock deal, when announced, was valued at $2.9 billion. Per the terms of the merger agreement, shareholders of FCB will get a fixed ratio of 1.055 shares of Synovus common stock per share. Based on Synovus’ closing share price on Jul 23, 2018, the deal is valued at $58.15 per FCB share. On completion, approximately 30% of the combined entity will be held by the existing shareholders of FCB.

Following the merger’s completion, about $40 million in pretax synergies is anticipated to be fully realized by 2020. Excluding one-time charges, the acquisition is likely to be around 6.5% accretive to earnings per share in 2020. Moreover, tangible book value per share dilution of 3.3%, with an earn-back period of less than two years, is estimated from the deal.

Both companies’ boards of directors have approved the merger.

As of September 2018, FCB holds $12.4 billion in assets and $10.2 billion in deposits, along with 51 branches in Florida.

Our Take

Synovus’ results were quite decent for the Jul-Sep period. We believe the company’s focus on both organic and inorganic growth, together with cost-containment efforts, will pay off and aid bottom-line expansion in subsequent years. Furthermore, completion of the deal will facilitate Synovus with additional liquidity and capital, aiding organic growth, and achievement of expected long-term ROA and efficiency goals, creating the largest mid-cap bank in the Southeast by deposits.

Currently, Synovus carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company have lost around 29.2% over the past three months compared with a decline of 18.5% recorded by the industry.



 

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