Aurora, Ill.-based Old Second Bancorp Inc. agreed to acquire Chicago-based Greater Chicago Financial Corp. and its subsidiary ABC Bank in an all-cash deal valued at about $41.1 million.
Greater Chicago Financial will merge into Old Second Bancorp and ABC Bank will merge into Old Second Bancorp unit Old Second National Bank.
The consideration represents roughly 119% of Greater Chicago Financial's tangible book value as of Sept. 30, according to the press release.
SNL also calculates the deal value to be 119.0% of book and tangible book, on an aggregate basis. It is 11.71% of assets and 15.20% of deposits.
SNL valuations for bank and thrift targets in the Midwest region between Dec. 26, 2016, and Dec. 26, 2017, averaged 157.52% of book, 162.16% of tangible book and had a median of 19.63x last-12-months earnings, on an aggregate basis.
Old Second Bancorp will acquire and simultaneously retire $6.3 million of outstanding Greater Chicago Financial subordinated debentures. The ultimate per-share consideration for Greater Chicago Financial shareholders will depend on the conversion election of holders of around $2.0 million of subordinated debentures that are convertible to common stock. Pursuant to the deal, the purchase price will be increased by an amount equal to the total amount of outstanding principal and accrued but unpaid interest of such converted debt actually converted into Greater Chicago Financial common stock.
The transaction, which is subject to regulatory and Greater Chicago Financial shareholder approvals, is set to close in the second quarter of 2018.
Old Second Bancorp expects $4 million in transaction- and merger-related expenses. The deal also assumes 30% annual cost savings with full run rate realized in 2019.
Old Second Bancorp anticipates the acquisition to be immediately accretive to earnings per share, exclusive of transaction- and integration-related expenses, and to yield a tangible book value earnback of about two years. The deal is expected to add around 7 cents to Old Second Bancorp's 2018 EPS and around 16 cents to 2019 EPS, under the new tax plan. The internal rate of return is more than 20%.
Old Second National Bank had assets of $2.34 billion as of Sept. 30, SNL data shows. As of the same date, ABC Bank had total assets of $350.4 million, including $246.3 million of total loans, according to the release.
SNL data shows that in Illinois, Old Second Bancorp will expand in Cook County by three branches to be ranked No. 41 with a 0.12% share of about $282.90 billion in total market deposits and will expand in DuPage County by one branch to be ranked No. 32 with a 0.31% share of roughly $40.58 billion in total market deposits.
The investment banking firm of D.A. Davidson & Co. and the law firm of Robbins Salomon & Patt Ltd. advised Greater Chicago Financial. The law firm of Nelson Mullins Riley & Scarborough LLP represented Old Second Bancorp.
SNL is an offering of S&P Global Market Intelligence.