First Citizens BancShares (NASDAQ: FCNCA) and CIT Group (NYSE: CIT) recently merged in an all-stock deal valued at $2.2 billion that will create the 19th largest bank in the U.S. First Citizens will be the surviving entity and the combined bank will have more than $100 billion in assets and continue to trade under the ticker FCNCA.
Following the announcement of the deal on Oct. 16, stocks for both companies surged, with First Citizens climbing more than 11% on the day and CIT Group accelerating more than 26%. Typically, the acquiring company tends to see its stock decline or rise very minimally following the announcement of an acquisition, so you know the market loves this deal. Here are three reasons why.
Management says the deal will be accretive to earnings by roughly 53%. Currently, First Citizens is projecting stand-alone earnings of $46.08 per share in 2022. After the merger, First Citizens believes it can do earnings of $70.50 per share in 2022. The deal is also supposed to be 30% accretive to tangible book value per share (TBVPS), and increase First Citizens' stand-alone TBVPS from $341.21 to nearly $470 following the transaction. This will give First Citizens a more valuable currency, which is helpful when making acquisitions.
For further details see:3 Reasons Investors Love the First Citizens-CIT Group Merger