BOK Financial Eyes Expansion, To Buy CoBiz Financial For $1B

BOK Financial Corporation (NASDAQ:BOKF) continues to move ahead with its expansion strategy. Strengthening its foothold in Colorado and Arizona, the company is set to acquire Denver-based CoBiz Financial Inc. (NASDAQ:COBZ) . The firms have signed a definite agreement under which the latter will be integrated into the former in a stock-cash deal worth about $1 billion.

The deal awaits certain customary closing conditions, including regulatory approvals and CoBiz shareholders’ approval. Notably, the merger is likely to be completed in the fourth quarter of 2018.

Terms of the Deal

Per the terms of the transaction, CoBiz shareholders will be receiving shares at an exchange ratio of 0.17 shares of BOK Financial common stock for each CoBiz share and $5.70 in cash per CoBiz share. Notably, common shareholders of CoBiz will be entitled to receive $977 million of total deal value, based on the closing price of BOK Financial on Jun 15, 2018.

Notably, cash or stock option is subject to the overall value of the deal, which is 75% in stock and 25% in cash.

Post merger, Chairman and CEO Steve Bangert of CoBiz will be part of BOK Financial’s board of director.

CoBiz has total assets of about $3.8 billion, with a strong momentum of earnings and revenues, since 1994. With a robust presence in Colorado and Arizona, CoBiz is a commercial bank focused on specialty lending lines of business. Such business includes healthcare and public finance, along with fee-generating businesses, such as wealth management and commercial insurance.

“CoBiz is a perfect fit as a merger partner for BOK Financial,” said Steven G. Bradshaw, president and chief executive officer of BOK Financial. “Steve Bangert and his team have built a well-respected commercially-focused bank that has consistently grown shareholder value, with a strong credit culture and differentiated approach to business banking. The two banks have enjoyed a close relationship for almost two decades, and both franchises will benefit as a result of this partnership. We believe the combined organization will be the premier commercial bank in Colorado and Arizona,” Bradshaw further noted.

Goldman Sachs (NYSE:GS) acted as financial advisor for BOK Financial, while BofA Merrill Lynch, a unit of Bank of America (NYSE:BAC) , was the advisor for CoBiz.

After Effects of the Deal

“The merger drives an internal rate of return in excess of 20 percent, is materially accretive to earnings per share, enhances our return on equity and return on assets, and provides further geographic diversity for both banks’ loan and deposit portfolio. In addition, the issuance of over 7 million shares as consideration for CoBiz shareholders should provide additional trading liquidity in BOK Financial common stock,” said Bradshaw.

Pre-tax merger and integration costs are anticipated to approximate around $60 million for BOK Financial. Further, annual cost savings of around 40% of CoBiz’s non-interest expense will likely be recorded.

Per BOK Financial’s expectations, the deal is likely to be 6% accretive to earnings in 2019 and 9% in 2020. Notably, the year 2020 will be the first full year with synergies. Furthermore, the company expects an IRR of more than 20% from this merger agreement.

Conclusion

Over the past several years, BOK Financial has transformed from merely being a bank in Oklahoma to a chief financial service provider. The company has continued its expansion into carefully selected markets in neighboring states. Currently, economic growth in Colorado is favorable for business expansion which is likely to benefit the bank.

We remain encouraged by such expansion moves of BOK Financial and believe its strong capital position will induce the company to undertake further strategic acquisitions.

BOK Financial currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company have gained 3.9% over the last six months, outperforming the industry’s decline of 2.6%.

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