Valley National in N.Y. to buy Bank Leumi USA for $1.1B

Valley National Bancorp in New York has agreed to buy Bank Leumi USA in New York. 

The $41 billion-asset Valley said in a press release Thursday that it will pay Bank Leumi Le-Israel B.M. about $1.2 billion in cash and stock for the $8.4 billion-asset Bank Leumi. The deal, which is expected to close in the first quarter or early in the second quarter, priced Bank Leumi at 130% of its tangible book value.

Bank Leumi has $7.1 billion of deposits and $5.4 billion of loans. It has five commercial offices located in New York, Los Angeles, Chicago, Miami and Palo Alto, Calif. About a fifth of its revenue comes from noninterest income. 

“We are extremely excited about the combination with Bank Leumi and the diverse growth opportunities that we expect the partnership will bring,” Ira Robbins, Valley’s chairman, president and CEO, said in the release. 

“Bank Leumi’s unique deposit verticals, including the technology and venture capital business, will continue the significant funding improvement that we have driven over the last few years,” Robbins added. “On the lending side, Bank Leumi will add diversification into niche C&I segments and new geographies including in California and Illinois. We are also eager to scale Bank Leumi’s private banking platform across Valley’s larger customer base and footprint.” 

The deal is expected to be about 7% accretive to Valley’s 2023 earnings. It should take a year for Valley to earn back an estimated 1% dilution to its tangible book value.

Valley plans to cut about a third of Bank Leumi's annual noninterest expense. The company expects to incur $80 million of merger-related expenses.

Bank Leumi Le-Israel B.M. will own more than 14% of Valley’s common stock when the deal closes. Bank Leumi Le-Israel B.M. agreed to a four-year lock-up for those shares, with a quarter of the holdings being released from the lock-up on each anniversary of closing. 

Valley and Bank Leumi Le-Israel B.M. also entered into an ongoing business agreement that will include loan participations and customer referrals. 

Two Bank Leumi Le-Israel B.M. directors to Valley’s board, including Avner Mendelson, Bank Leumi’s president and CEO. Mendelson is expected to become Valley’s vice chairman.

The deal is the latest involving a foreign bank selling its U.S. operations.

Banco Bilbao Vizcaya Argentaria sold its U.S. bank to PNC Financial Services Group for $11.6 billion earlier this year. HSBC is planning to sell its U.S. retail operations to Citizens Financial Group in Providence, R.I., and Cathay General Bancorp in Los Angeles.

U.S. Bancorp agreed on Tuesday to buy MUFG Union Bank in San Francisco from Mitsubishi UFJ Financial Group for $8 billion.

Morgan Stanley and Wachtell, Lipton, Rosen & Katz advised Valley. Piper Sandler, Davis Polk & Wardwell and Meitar & Co. advised Leumi.