The deal will create the 29th-largest publicly traded U.S. bank by assets, according to Wayne-based Valley.
“Bank Leumi’s unique deposit verticals, including the technology and venture capital business, will continue the significant funding improvement that we have driven over the last few years,” Valley CEO Ira Robbins said in a statement. “On the lending side, Bank Leumi will add diversification into niche C&I segments and new geographies including in California and Illinois.”
Under the terms of the agreement, Leumi shareholders will receive 3.8025 shares of Valley common stock and $5.08 in cash subject to specified adjustments for each share of Leumi common stock they own. Based on Valley’s Sept. 22 closing stock price, the transaction is valued at an estimated $1.148 billion, including the value of options. Upon completion of the acquisition, Bank Leumi Le-Israel will own more than 14% of Valley’s stock.
Valley said the deal will be approximately 7% accretive to its 2023 earnings on a fully phased in basis. Tangible book value dilution is expected to be roughly 1% with an earn back period of approximately one year. The transaction is expected to be effectively neutral to Valley’s tangible common equity to tangible asset ratio at close. In addition, Leumi will get two directors on Valley’s board, one of whom is expected to be Leumi President and CEO Avner Mendelson. He will serve as vice chairman.
“In Valley, we have found an unparalleled cultural and strategic partner with a shared client focus and commitment to building lasting relationships,” Mendelson said. “Our high-caliber talent, impressive regional presence, and business lines will become growth engines for Valley’s commercial business and support Valley’s growth vision.”
The merger partners have also entered into an agreement providing for a continuing business relationship, including loan participations and customer referrals. The arrangement is designed to allow the target’s Israeli parent to expand its U.S. activities.
Bank Leumi provides full-service relationship banking for middle-market commercial clients and private banking services for high net-worth individuals. As of June 30, 2021, it had total assets of $8.4 billion, total deposits of $7.1 billion, and gross loans of $5.4 billion. Valley National reported approximately $41 billion in assets as of June 30.
Morgan Stanley & Co. LLC served as financial advisor to Valley; Wachtell, Lipton, Rosen & Katz served as legal counsel. Piper Sandler & Co. provided financial advice to Leumi; Davis Polk & Wardwell LLP and Meitar & Co. counseled the target.