NEW YORK (Reuters) - First Horizon National Corp (N:FHN) and IBERIABANK Corp (O:IBKC) said on Monday they had agreed to merge to create one of the largest banks based in the southeast of the United States.
The transaction, the second-largest U.S. bank merger this year by assets, received a positive response from both sets of shareholders: First Horizon and IBERIABANK stock ended 3.2% and 2.8% higher respectively on Monday.
Structured as a merger of equals, albeit with legacy First Horizon shareholders controlling 56% of the new entity, the combined bank - called First Horizon - will have around $75 billion in assets and a presence in 11 southeastern U.S. states.
"We have a complementary market presence throughout the south, and the combined franchise will have a good mix between high-growth and stable markets," Bryan Jordan, chief executive of First Horizon, told an analysts' call.
American banks have been under pressure to consolidate as a way to manage the increased costs of regulatory compliance and spending on technology, as well as combat heightened competition in many markets from the largest four lenders in the country.
The recent reversal in interest rate outlook - the U.S. Federal Reserve cut rates for the third time in 2019 last week - also makes it harder for banks to generate profits.
In February, BB&T Corp (N:BBT) and SunTrust Banks Inc (N:STI) said they would combine in the largest U.S. bank merger since the global financial crisis. That is also structured as a merger of equals.
The combined First Horizon/IBERIABANK would have a market capitalization of more than $9 billion, based on current valuations. The current chief executives, Daryl Byrd of IBERIABANK and First Horizon's Jordan, will serve as executive chairman and CEO respectively.
Under the terms of the deal, IBERIABANK stockholders will receive 4.584 First Horizon shares for every share they own. The new bank, following the closing of the deal in the second quarter of 2020, will be headquartered in Memphis.
Morgan Stanley (NYSE:MS) was financial adviser to First Horizon, with Sullivan & Cromwell LLP acting as legal counsel. Keefe, Bruyette & Woods and Goldman Sachs (NYSE:GS) provided financial advice and Simpson Thacher & Bartlett LLP were legal advisers to IBERIABANK.