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Valley National Closes Oritani Deal, Expands in New Jersey

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Valley National Bancorp VLY successfully completed the acquisition of Oritani Financial Corp for $740 million. With an aim to further expand presence in New Jersey, Valley National had announced the all-stock deal in June 2019.

The acquisition is expected to double Valley National’s market share in Bergen County and enhance its presence in Hudson County. Also, it will strengthen the company’s capital base and hasten “previously disclosed strategic initiatives.”

Ira Robbins, Valley National's president & CEO, said, “The completion of this transaction unites two strong institutions, giving us a more significant presence in existing markets. Additionally, this combination provides Valley with substantial capital for future organic growth across all aspects of the business.”

Per the terms of the deal, Valley National will issue nearly 72 million shares of common stock. Shareholders of Oritani will receive 1.60 shares of Valley National for each Oritani share they own.

Moreover, at the time of announcement of the deal, it was stated that Oritani’s dividend payout policy for the quarter would not be impacted by the deal.

Also, Valley National projected 50% cost savings, “in addition to those related to legacy Oritani benefit plans.” However, the company did not make any assumption of cost synergies, owing to branch closures though both companies have “100% of their respective branches within a 3-mile radius of a competing branch.”

As decided, Kevin Lynch, chairman, president & CEO of Oritani, has joined the board of directors of Valley National since the merger became effective on Dec 1.

Notably, the full systems integration is expected to be completed by the end of first-quarter 2020.

The combined company will have roughly $38 billion in assets, $30 billion in loans and $29 billion in deposits. Also, there will be 245 branches across New Jersey, New York, Florida and Alabama.

Our Take

Valley National continues to witness steady revenue improvement, driven by organic and inorganic growth efforts. Over the years, the bank has expanded its footprint in New Jersey, Florida and New York through buyouts. These deals have been accretive to earnings and have expanded market share.

So far this year, shares of Valley National have rallied 27%, outperforming the industry’s growth of 15.5%.

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

Of late, consolidation in the banking sector is on the rise, mainly driven by the easing of stringent regulations. Several mid-sized banks, including Fifth Third Bancorp (FITB - Free Report) , SVB Financial Group SIVB and Prosperity Bancshares, Inc PB, have undertaken opportunistic buyouts, which will not only lead to geographic expansion but also help diversify revenue base.

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