Puerto Rico-based First BanCorp. agreed to acquire Banco Santander Puerto Rico in an all-cash transaction for about $1.1 billion.

Banco Santander Puerto Rico and its holding company, Santander BanCorp, will be merged into First BanCorp. unit FirstBank Puerto Rico. The consideration includes a base purchase price of $425 million plus $638 million of Banco Santander Puerto Rico's excess capital as of June 30, paid at par.

The deal is expected to be 35% accretive to First BanCorp.'s 2020 consensus EPS of 81 cents and will have an internal rate of return of approximately 20% and pretax annual cost savings of $48 million, expected to be fully achieved in 2021. It also has one-time restructuring charges of approximately $76 million, which are expected to be phased in 50% at the close of the deal, with the remainder to be incurred in 2021. FirstBank will not assume any of Banco Santander Puerto Rico's nonperforming assets.

S&P Global Market Intelligence calculates the deal value is 17.22% of assets and 21.09% of deposits. Valuations for bank and thrift targets in the Mid-Atlantic region between Oct. 21, 2018, and Oct. 21, 2019, averaged 138.90% of book and 147.51% of tangible book and had a median of 15.60x last-12-months earnings on an aggregate basis.

Due to the deal, First BanCorp. will expand in Puerto Rico by 28 branches to be ranked third with a 15.36% share of approximately $74.27 billion in total market deposits.

The transaction is expected to close in the middle of 2020. The purchase price is subject to adjustment based on Banco Santander Puerto Rico's balance sheet as of the closing date. The combined business will offer customers the second-largest branch network in Puerto Rico, with over $17 billion in combined total assets.

As of June 30, Banco Santander Puerto Rico had $6.2 billion in assets, $3.1 billion of loans and $5.0 billion of deposits, according to a press release. First BanCorp had $12.54 billion in assets as of June 30, according to data from S&P Global Market Intelligence.

Goldman Sachs & Co. LLC was financial adviser, and Skadden Arps Slate Meagher & Flom LLP was legal counsel to First BanCorp. Moelis & Co. LLC and Simpson Thacher & Bartlett LLP advised First BanCorp.'s board.

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