Fairfield, N.J.-based Kearny Financial Corp. agreed to acquire Millington, N.J.-based MSB Financial Corp. in a transaction valued at more than $94 million based on Kearny Financial's closing stock price of $14.10 per share on Dec. 17.
The merger is expected to close during the second calendar quarter of 2020.
Under the terms of deal, MSB Financial will merge into Kearny Financial. Each outstanding MSB Financial common share will be exchanged for 1.3 Kearny Financial common shares or $18.00 in cash. MSB Financial stockholders may elect cash or stock, or a combination thereof, subject to proration to ensure that, in the aggregate, 10% of the company's shares will be converted into cash and the remaining 90% will be converted into Kearny Financial shares.
Upon closing, Kearny Financial shareholders will own approximately 94% and MSB Financial shareholders will own about 6% of the combined company.
The transaction is expected to be immediately accretive to Kearny Financial's EPS by roughly 11% with fully phased in noninterest expense cost savings, on a pro forma basis. Tangible book value dilution is expected to be about 1.6%, with an earnback period of approximately 2.8 years under both the crossover and earnings accretion methods, according to a news release.
On a per-share basis, S&P Global Market Intelligence calculates the deal value to be 148.1% of book and tangible book and 22.9x earnings. The deal value is also 16.19% of assets and 20.11% of deposits, and the tangible book premium to core deposits ratio is 8.54%.
S&P Global Market Intelligence valuations for bank and thrift targets in the Mid-Atlantic region between Dec. 18, 2018, and Dec. 18, 2019, averaged 147.96% of book and 158.61% of tangible book and had a median of 16.27x last-12-months earnings, on a per-share basis.
MSB Financial, the holding company for Millington Bank, had approximately $591 million of assets as of Sept. 30. Kearny Financial, the holding company for Kearny Bank, had about $6.6 billion in total assets as of the same date. On a pro forma basis as of Sept. 30, the combined company is expected to have roughly $7.25 billion of assets, according to the news release.
Upon completion of the deal, Kearny Financial will enter Somerset County, N.J., with three branches to be ranked No. 16 with a 0.71% share of about $13.86 billion in total market deposits and will expand in Morris County, N.J., by one branch to be ranked No. 13 with a 2.14% share of roughly $25.14 billion in total market deposits, according to S&P Global Market Intelligence data.
PNC FIG Advisory Inc. served as financial adviser and Luse Gorman PC acted as legal counsel to Kearny Financial. FinPro Capital Advisors Inc. served as financial adviser and Jones Walker LLP acted as legal counsel to MSB Financial.