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Valley (VLY) Gets Shareholders' Nod for Bank Leumi USA Buyout

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Valley National Bancorp VLY recently announced that its shareholders have approved the deal for the company to acquire Bank Leumi USA, the U.S. arm of Bank Leumi Le-Israel B.M. 98% of the company’s shareholders voted in favor of share issuance in the Special Meeting of Shareholders. The stock-cum-cash acquisition was announced on Sep 23, 2021.

The acquisition will provide Valley National with better commercial products while improving the company’s funding verticals. It will further help expand VLY’s technology and venture capital banking business.

The transaction will be mutually beneficial, as Bank Leumi will be able to strengthen its exposure to the U.S. banking market. The combined company will be the 29th largest publicly traded U.S. bank in terms of assets.

At the time of the announcement, it was noted that as per the deal, shareholders of Bank Leumi will receive 3.8025 shares of Valley National common stock and $5.08 in cash (subject to specified adjustments) for each of their shares held. The estimated value of the transaction is $1,148 million. Following the completion of the deal, expected to occur in late first-quarter 2022 or early second quarter, Bank Leumi Le-Israel B.M. will get a stake of 14% of Valley’s common stock. The transaction is expected to be 7% accretive to Valley National’s 2023 earnings on a fully phased-in basis. Further, tangible book value is expected to dilute by almost 1% with an earn-back period of approximately a year.

Valley National received approvals for the deal from the Federal Reserve Bank of New York and the Office of the Comptroller of the Currency on Jan 4, 2022. The transaction is yet to get approvals from the New York State Department of Financial Services and the Bank of Israel.

Our Take

Valley National has been strengthening its footprint and product suites, and expanding inorganically through strategic acquisitions. In December 2021, the company acquired Westchester Bank Holding Corporation, while in October it acquired Dudley Ventures. Further, the company’s previous acquisitions, including Oritani Financial Corp. and USAmeriBancorp, Inc., have expanded its footprint in New Jersey and Florida.

Over the past year, shares of Valley National have gained 39.6% compared with 46.6% growth of the industry.

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Zacks Investment Research

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

Inorganic Growth Efforts by Other Firms

Several companies from the finance sector are undertaking consolidation efforts to improve competencies in a bid to counter the low-interest-rate environment.

In a move to enhance M&A advisory service competencies in the digital-infrastructure sector, Citizens Financial Group, Inc. CFG announced a definitive agreement to acquire substantially all assets of DH Capital LLC.

The move marks Citizens Financial’s third acquisition over the past four months to augment its corporate advisory team. In September 2021, CFG had closed the buyout of Willamette Management Associates and hadacquired JMP Group in November.

Velocity Financial, Inc. VEL acquired the majority stake in Century Health & Housing Capital. Century, licensed “Ginnie Mae” issuer and servicer, offers government-insured Federal Housing Administration mortgage financing for multi-family housing, senior housing and long-term care/assisted living facilities.

The acquisition will help Velocity Financial leverage Century’s well-established platform and diversify revenues with the addition of fee-based origination and servicing income. This, along with Velocity Financial’s national origination footprint, offers ample development scope for origination growth and the expansion of commercial mortgage product offerings.

RBB Bancorp RBB entered a definitive agreement to buy Gateway Bank in a cash transaction valued at $22.9 million in a bid to penetrate the strategic San Francisco Bay Area. The buyout will expand RBB Bancorp’s physical presence in six of nine target markets of Gateway Bank and provide a profitable base to extend the advancement the latter has made in the Bay Area.

The deal is also in line with RBB Bancorp’s aim to establish its relationship-based banking model in the region for the community.

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Valley National Bancorp (VLY) : Free Stock Analysis Report

Citizens Financial Group, Inc. (CFG) : Free Stock Analysis Report

RBB Bancorp (RBB) : Free Stock Analysis Report

Velocity Financial, Inc. (VEL) : Free Stock Analysis Report

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