trending Market Intelligence /marketintelligence/en/news-insights/trending/meWwpVnlYhpY4wPc_UECdA2 content esgSubNav
In This List

Ohio-based First Defiance buying United Community in $473M all-stock deal

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


Ohio-based First Defiance buying United Community in $473M all-stock deal

Defiance, Ohio-based First Defiance Financial Corp. agreed to acquire Youngstown, Ohio-based United Community Financial Corp. in an all-stock deal valued at roughly $473 million.

United Community Financial unit Home Savings Bank will merge into First Defiance unit First Federal Bank of the Midwest as part of the deal.

Per the terms of the deal, United Community shareholders will receive 0.3715 of a First Defiance common share for each United Community share owned. First Defiance shareholders will own roughly 52.5% of the combined company, while United Community stockholders will own about 47.5%.

First Defiance had total assets of $3.28 billion, and United Community had total assets of $2.87 billion, both as of June 30, according to S&P Global Market Intelligence data. Based on June 30 data, the two companies said the pro forma combined entity will have approximately $6.1 billion in assets, $4.9 billion in loans and $5.0 billion in deposits.

The deal is expected to close early in the first quarter of 2020. The combined company will operate under a name to be determined prior to closing. The holding company will be based in Defiance, and the bank will be based in Youngstown.

S&P Global Market Intelligence calculates that the deal value is 149.55% of common equity, 161.65% of tangible common equity and 12.42x earnings, on an aggregate basis. It is also 16.55% of assets and 21.02% of deposits, and the tangible book premium-to-core deposits ratio is 9.23%.

S&P Global Market Intelligence valuations for bank and thrift targets in the Midwest region between Sept. 9, 2018, and Sept. 9, 2019, averaged 146.15% of book and 148.92% of tangible book and had a median of 16.73x last-12-months earnings, on an aggregate basis.

First Defiance will expand in Ohio by 33 branches to be ranked No. 11 with a 1.25% share of approximately $343.2 billion in total market deposits. The deal will also enable the company to enter Pennsylvania with one branch, which will be ranked no. 164 with a 0% share of approximately $395.15 billion in total market deposits.

First Defiance President and CEO Donald Hileman will serve as CEO of the holding company and the bank before transitioning to executive chairman in early 2021. United Community Financial President and CEO Gary Small will become president of the holding company and the bank before becoming CEO when Hileman assumes the executive chairman role. The combined company's board will be comprised of seven members from First Defiance and six members from United Community Financial. The composition of the board will be determined in the coming months.

First Defiance expects the deal to yield run-rate EPS accretion of about 14%, with cost savings fully phased in. Assuming pro forma merger adjustments and an expected early 2020 closing, the company forecasts dilution to tangible book value per share to be roughly 4%, inclusive of restructuring charges. The earnback period is expected to be at about 1.8 years using the crossover method, First Defiance said. The combined company will deliver metrics which include a more than 17% return on average tangible common equity and a more than 1.5% return on average assets, according to the news release.

The deal also has a mutual termination fee of $18.4 million, to be paid under certain circumstances.

Keefe Bruyette & Woods served as financial adviser and provided a fairness opinion to First Defiance, while Barack Ferrazzano Kirschbaum & Nagelberg LLP is the company's legal counsel. Sandler O'Neill + Partners is United Community's financial adviser and provided a fairness opinion. Wachtell Lipton Rosen & Katz served as United Community's legal counsel.

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

SNL Image