First Horizon (FHN) Acquires Capital Bank For $2.2 Billion

First Horizon National Corporation (NYSE:FHN) , headquartered at Tennessee, completed the stock-cash acquisition deal with Charlotte, N.C.-based Capital Bank Financial Corp. CBF, under which the former acquired the latter for a total value of $2.2 billion. The combined entity forms the fourth largest regional bank in the Southeast. Notably, the deal was announced in May 2017.

“We are excited to complete the merger of First Horizon and Capital Bank Financial and expand the capabilities of our company,” said Bryan Jordan, chairman and CEO of First Horizon. “We are proud to merge the talented teams at First Tennessee and Capital Bank to create an even stronger regional bank that offers differentiated customer service and enhances our presence throughout our markets,” added Jordan.

Terms of the Deal

Per the deal, each common shareholder of Capital Bank will get cash or stock equivalent to 1.750 of First Horizon shares and $7.90 in cash for every Capital Bank share held, subject to certain conditions. The deal has been agreed upon 80% stock and 20% cash. Specifically, Capital Bank shareholders, in total, will own about 29% of First Horizon’s common shares and $411 million in cash.

First Horizon, with $30 billion in assets, and Capital Bank, with $10 billion in assets, created the combined entity with $40 billion in assets, $32 billion in deposits and $27 billion in loans. The high potential market in North Carolina, along with the strong relationships that Capital Bank has built in the area, seems to have prompted First Horizon to opt for the acquisition. The deal certainly fortifies First Horizon’s footprint in the Southeast, with about 350 branches in Tennessee, North Carolina, South Carolina, Florida, Mississippi, Georgia, Texas and Virginia.

According to the terms of the deal, First Horizon will maintain its First Tennessee bank brand in Tennessee, while the Capital Bank name will be used for branches outside Tennessee.

Barclays (LON:BARC) Capital Inc., a unit of Barclays PLC (NYSE:BCS) and Morgan Stanley & Co. LLC, a unit of Morgan Stanley (NYSE:MS) acted as financial advisors for First Horizon.

Bottom Line

We believe the latest acquisition is a befitting one that will support the future prospects of First Horizon, which, amid the financial crisis, was adversely affected as a result of its exposure to national mortgage and construction lending. The company decided to exit these business lines and focus on growing the core Tennessee banking franchise.

The company’s repositioning and restructuring efforts, which are still underway, help it reallocate the capital into core markets. Also, its focus on cost control and efforts to boost long-term profitability are anticipated to augur well.

Such moves have caused investors to become optimistic about First Horizon's growth prospects. Notably, the company's share price rose nearly 15.9% over the last six months as compared with 11.6% growth recorded by the industry.

Currently, First Horizon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks’ Best Private Investment Ideas

While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.

Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.

Click here for Zacks' private trades >>

Barclays PLC (BCS): Free Stock Analysis Report

First Horizon National Corporation (FHN): Free Stock Analysis Report

Morgan Stanley (MS): Free Stock Analysis Report

Original post

Zacks Investment Research