The M&A scene for U.S. banks has been big on rumors (like Santander (NYSE:STD) and M&T Bank (NYSE:MTB)) and the acquisition of small, failed institutions, but there has been relatively little in terms of willing deals among two solvent parties. Old National Bancorp (NYSE:ONB) shook that up in a big way on Wednesday by buying Monroe Bancorp (Nasdaq:MROE) at a sizable premium.
The Deal
At the time of the announcement, Old National was offering almost $84 million in stock to acquire Monroe Bancorp, a deal that works out to 1.275 shares of Old National for every share of Monroe. At the prices of each stock prior to the open of trading Wednesday, that represented an eye-popping 148% premium for Monroe shares. The deal does include a collar, though, such that if Old National's stock moves above $10.98, Monroe shareholders will get $14 of Old National shares.
Although the deal was designed with a target price of $13.35 in mind for Monroe shares, as of this writing the market has pushed Monroe's price up to only about $11.30. Do not let the "only" mislead, however; that still represents over 100% appreciation for the stock. At this price, the trailing price-to-book ratio is 1.27; a strong premium relative to larger Midwestern banks like Fifth Third (Nasdaq:FITB), TFS Financial (Nasdaq:TFSL) or Marshall & Ilsley (NYSE:MI).
Please go to Investopedia and read the full article:
http://stocks.investopedia.com/stock-analysis/2010/A-Small-Bank-Deal-With-A-Big-Premium-MROE-ONB-STD-MTB-FITB1008.aspx
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