Huntington Bancshares agrees to acquire First Michigan for 21.3 times earnings

Weekly Corporate Growth Report, May 12, 1997

The Deal: Huntington Bancshares has agreed to acquire First Michigan Bank Corp. in a transaction valued at $897 million. Shareholders of First Michigan will receive 1.05 Huntington common shares for each of their First Michigan shares. Based on a recent closing price of $29.75/share, this comes to $31.11/share.

Discussion: The move comes as Huntington is making efforts to expand its retail presence in the Midwest The combined company would have a market capitalization of $5.2 billion and stockholder's equity of $1.9 billion. If combined, Huntington says that the two companies could save $19 million annually through the elimination of redundant systems and excess capacity, although it is not known how many jobs will be eliminated.

The transaction would also open up all of Michigan to Huntington. Currently, Huntington has a small operation with close to $22 billion in assets in the eastern part of the state. First Michigan has 90 banking offices and $3.6 billion in assets. its primary markets are in Grand Rapids, Holland, Kalamazoo and Muskegon.

Huntington has been a frequently mentioned takeover target The move would boost its assets to $25 million and show others just how serious it is at staying independent. Zuheir Sofia, president and CEO of Huntington, has affirmed that the company is "committed to remain an investor-owned company." He has also said that the bank is unlikely to make another large deal of this nature anytime in the near future. However, deals that fill in existing markets and adjoining acquisitions are still possible.

Analysts expect the deal to slightly dilute Huntington's earnings in 1997, but it should add to them in 1998.