How the Citizens-Investors merger coalesced

Investors Bancorp in Short Hills, N.J., had “substantive negotiations” with another bank months before agreeing to be sold to Citizens Financial Group in Providence, R.I. 

The $27 billion-asset Investors agreed in July to sell to the $185 billion-asset Citizens for $3.5 billion.

Investors, however, held discussions with another bank in its market in early 2019, and again from January to April in 2020, about a deal, according to a regulatory filing tied to the Citizens merger. The other company terminated discussion, paving the way for talks with Citizens. 

First, here are the details of the Citizens-Investors deal: 

• The deal, which is expected to close by mid-2022, priced Investors at 130% of its tangible book value.

• Citizens expects the deal to be 6.4% accretive to its 2023 earnings per share. It should take a little more than two years for Citizens to earn back an estimated 2.6% dilution to its tangible book value.

• Citizens plans to cut about 30% of Investors’ annual noninterest expenses, or $130 million. Citizens expects to incur about $400 million of merger-related expenses.

• Kevin Cummings, Investors’ chairman and CEO, and Michele Siekerka, one of the company’s directors, are expected to join Citizens’ board. 

Now for the key details revealed in the recent regulatory filing: 

• Investors’ management and the board felt the need to pursue a merger of equals, or a sale to a bigger bank, in 2019, citing the need for balance sheet growth, a flat yield curve and the need to invest in technology. 

• Informal conversations with a bank with operations in Investors’ region begain in April 2019.

• The talks became more substantive in July 2019 and there “were a number of discussion” from August 2019 to mid-March 2020. The companies paused their discussions when the coronavirus pandemic engulfed the United States. 

• The other company’s CEO contacted Cummings last January to resume talks. That company ended negotiations in mid-April, though the filing gave no reason for the decision.

• Bruce Van Saun, Citizens’ chairman and CEO, emailed Cummings in late April requesting a meeting. The meeting took place on May 5, and Van Saun expressed an interest in a deal. 

• Citizens and Investors signed a nondisclosure agreement on June 4, allowing each company to conduct due diligence. 

• Investors received an initial draft of the proposed merger agreement on July 8.

• On July 27, the companies agreed to an exchange ratio of 0.297 shares of Citizens stock and $1.46 in cash for each Investors share. Investors’ board unanimously approved the merger later that day. The deal was announced on July 28. 

• Cummings will receive $9.5 million for agreeing to a three-year non-competition and non-solicitation agreement. Overall, he is could receive an estimated $26.4 million in merger-related compensation.

• Domenick Cama, Investors' president and chief operating officer, is expected to receive about $15.7 million in merger-related compensation. He is set to serve as co-head of integration and as Citizens' New York City metro president.