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Old National Bancorp to acquire Anchor Bancorp in $303.2M cash-and-stock deal

Evansville, Ind.-based Old National Bancorp is buying St. Paul, Minn.-based Anchor Bancorp Inc. and unit Anchor Bank NA in a cash-and-stock deal valued at approximately $303.2 million, based on Old National's Aug. 7 closing price of $16.45 per share.

Under the deal terms, Anchor Bancorp shareholders will receive 1.35 Old National common shares and $2.625 in cash for each Anchor Bancorp common share held.

On an aggregate basis, SNL calculates that the deal value is 185.0% of book, 203.2% of tangible book and 17.1x earnings. The price is 17.66% of deposits and 14.75% of assets. The tangible book premium-to-core deposits ratio is 9.22%.

The deal, which is subject to regulatory and Anchor Bancorp shareholders' approval, is expected to close early in the first quarter of 2018.

Upon closing, the deal will make Old National, the parent of Old National Bank, the seventh-largest deposit holder in the Minneapolis and St. Paul markets.

SNL valuations for bank and thrift targets in the Midwest region between August 8, 2016, and August 8, 2017, averaged 149.32% of book, 154.19% of tangible book and had a median of 19.77x LTM earnings, on an aggregate basis.

As of June 30, Old National had $15 billion in assets and 188 locations. Anchor Bancorp had $2.1 billion in assets, $1.6 billion in loans, $1.7 billion in deposits, $164 million in common shareholder's equity, and 18 branches.

Old National Bancorp will enter Minnesota with 18 branches to be ranked sixth with a 0.73% share of approximately $222.0 billion in total market deposits.

According to an investor presentation made by Old National on Aug. 8, the deal value is 189% of tangible book per share, based on Anchor's June 30 tangible book value per share of $13.15. It is also 18.0x last-12-months earnings and 8.6% core deposit premium.

Excluding transaction expenses, EPS accretion is 7.0% in 2018. It will be 9.2% in 2019 with fully-phased cost savings. Tangible book value dilution is 3.6%, with earnback in 3.1 years using the crossover method. Internal rate of return is over 20%.

While the deal is expected to incur pretax costs of $25.2 million, it will result in cost savings of $15 million in 2018 and $20 million thereafter, Old National said in the investor presentation.

Old National added that it expects 14 of its banking centers to close in November, and flagged related one-time charges of around $5.0 million this year. The company, however, sees the branch rationalization driving an additional $4 million in cost savings in 2018.

Keefe Bruyette & Woods Inc. served as Old National's financial adviser, while Krieg DeVault LLP served as its legal adviser. For Anchor Bancorp, it was Sandler O'Neill & Partners LP and Barack Ferrazzano Kirschbaum & Nagelberg LLP.

To use S&P Global Market Intelligence's branch analytics tools to compare market overlap, click here. To create custom maps, click here.

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