Dive Brief:
- Billings, Montana-based First Interstate Bank is acquiring Sioux Falls, South Dakota-based Great Western Bancorp in a $2 billion, all-stock deal that is set to close during the first quarter of 2022, the banks said in a press release Thursday.
- Adding Great Western's 174 locations would more than double First Interstate's branch count to 321, according to American Banker. The deal would also expand First Interstate's footprint to 14 states, eight of which are new.
- Global investor rights law firm Halper Sadeh launched an investigation Thursday into whether the deal is fair to Great Western shareholders.
Dive Insight:
Thursday's deal marks the first acquisition for First Interstate since the COVID-19 pandemic began. The typically serial acquirer had made seven bank deals between 2014 and 2019, American Banker reported. But the Great Western transaction would represent the largest.
In his statement Thursday, First Interstate CEO Kevin Riley called the acquisition "a transformative moment." Indeed, the combined bank — which would be headquartered in Billings and carry the First Interstate name — would have more than $32 billion in assets, $18.4 billion in loans and $27.1 billion in deposits, making First Interstate roughly the 63rd-largest bank in the U.S., according to June data from the Federal Reserve.
"We both pride ourselves on being community banks with a strong focus on relationship building, customer service, and community outreach," said Riley, who would become the combined entity's chief executive. "We are eager to expand our community banking model into eight new states and look forward to building relationships with the employees and clients who call these beautiful regions home.”
First Interstate's footprint, prior to the deal's closing, encompasses Montana, Idaho, Washington, Oregon, Wyoming and South Dakota. Adding Great Western would give the Billings-based bank access to Arizona, Colorado, Kansas, Missouri, Nebraska, Iowa, Minnesota and North Dakota.
“These are attractive markets that will present good growth opportunities long into the future,” Riley said on a call with reporters Thursday, according to American Banker. “Cities like Omaha, Des Moines and Sioux Falls are growing nicely and are very similar to our existing Boise, Idaho, and Spokane, Washington, markets where we've had a great deal of success over the past few years.”
Great Western CEO Mark Borrecco is expected to become the combined entity's chief banking officer.
"We’ll be able to offer customers access to additional branch locations and new products and services, provide new growth and professional development opportunities to our employees, deliver additional returns to our shareholders, and have an even greater impact on our communities," Borrecco said, adding that combining with First Interstate would accelerate the bank's timeline to achieve its goals by two to four years.
Under the deal, Great Western shareholders will receive 0.8425 shares of First Interstate stock for each Great Western share they own, a 24.7% premium from Wednesday’s closing price, according to MarketWatch.
Halper Sadeh, however, launched a probe into whether Great Western and its board of directors violated securities laws or breached their fiduciary duties to shareholders. The law firm raised concerns as to whether First Interstate is underpaying for Great Western and whether all material information was disclosed ahead of the acquisition announcement.
Five directors from Great Western will become members of the First Interstate board of directors once the deal closes, at which point Great Western shareholders will own 43% of the combined company.
