Synovus to gobble up South Florida-based bank in $2.9 billion deal

Cementing itself as a major regional Southeast bank, Columbus-based Synovus on Tuesday unveiled plans to acquire a Florida bank headquartered in the Miami metro area in a deal valued at $2.9 billion.

Synovus said its purchase of Weston, Fla.-based FCB Financial Holdings Inc., which is Florida’s largest community bank, should be finalized in the first quarter of next year, pending approvals by regulators and both banks’ shareholders. Both firms’ boards of directors have given their approval.

Synovus is paying $58.15 per share of FCB stock, with the Florida bank’s former shareholders ultimately owning about 30 percent of the combined company once the purchase takes place.

The Columbus bank has long been a target of speculation that it might be bought out, while Synovus Chairman and Chief Executive Officer Kessel Stelling has consistently said his own company would be in the market for an acquisition of its own should the right financial institution come along. That time has arrived.

Stelling, on a conference call Tuesday with Wall Street analysts after the news broke, said his bank has been operating in Florida more than 30 years and following Florida Community Bank for many of those years, admiring its business performance. The deal is a good fit financially, he said, but also because there are similarities in the management culture and the focus on community-based banking.

“Simply put, the merger of Synovus and Florida Community Bank creates a stronger company with elevated growth and meaningful value creation,” he said. “It makes us the No. 1 mid-cap bank headquartered in the Southeast with a tradition of high-performing senior leaders and producers and the ability to leverage existing investments across a broader footprint.”

Once completed, the acquisition of FCB Financial Holdings, which operates Florida Community Bank, will make the larger Synovus a top five regional bank in terms of deposits. It will have $36 billion in deposits and oversee $44 billion in assets overall.

Synovus already has offices in the major markets of Pensacola, Tampa, Jacksonville, Orlando, Sarasota and Naples. This deal gives it 50 additional bank branches in the state — which will take the Synovus name — and a major presence in the South Florida area. That includes Miami-Dade County, a major hub in the Southeast with a population approaching 3 million people.

The city of Weston, where FCB Financial Holdings is headquartered, is in Broward County, with the county seat being Fort Lauderdale. For both banks’ customers, it will give those traveling throughout the Southeast access to more branches and ATM machines.

A graphic from a Synovus PowerPoint presentation shows FCB currently with branches clustered from the Miami area northward along the Atlantic coast, with locations as far north as Orlando and Daytona Beach. FCB also has offices in the Tampa market and southward in and around the Naples area. In all, the combined Synovus-Florida Community Bank will have 98 branches in Florida, the graphic shows.

Once the merger takes place, FCB Financial Holdings President and CEO Kent Ellert will become an executive vice president at Synovus and market president in Florida. In a statement, he expressed excitement about joining the “Synovus family” in the coming months, calling it “one of the most prominent and successful regional banks in the country.”

On the conference call, Morgan Stanley research analyst Ken Zerbe asked Ellert why the banking firm was willing to sell at the more modest price of $58.15 per share rather than at a higher premium. The Florida bank executive said his management team had spent months talking with Synovus and finally reached a comfort zone that the Georgia company could take the South Florida banking operation to a higher level of growth.

Ellert pointed specifically to his firm’s efforts to expand along the Interstate 4 corridor from Sarasota to Tampa to Orlando. He said Florida Community Bank was anticipating at least five years of hard work to grab significant market share from much larger banks in that area of the state.

“In this combination (of Synovus and FCB), overnight, we’re over $3 billion in that marketplace. We go from seven offices to 20 offices, a sales team from 7 to 16, and guess what, the Synovus banner is well respected and strong and that will give us an opportunity to move forward” at a much faster pace, he said.

“Our view is this is a very, very attractive transaction strategically for the shareholder and that will be realized over time, and that we’ll do what we always do on both sides of this table, prove ourselves everyday in the marketplace and make this an extremely successful combination,” Ellert said.

Another brokerage analyst, Jennifer Demba of SunTrust, asked how aggressive Synovus might be when looking to slice expenses following the acquisition’s consummation, which is typical in any industry after one company purchases another. The combined companies will have 300 branches in all, and nearly 5,300 employees, about 700 of those from Florida Community Bank.

Stelling downplayed the notion that any wholesale cuts are on the way.

“We’ll look for efficiencies in the typical back-room functions, but there are no cuts planned in any of the revenue (producing) areas,” he said. “In fact, we really like the way that the FCB team is expanding and growing in their markets. Yes, over time the commitment from both teams is to continue to look for ways to make this transaction better than announced today. That’s our goal.”

Synovus itself operates 250 bank branches in the Southeastern states of Georgia, Alabama, Florida, South Carolina and Tennessee. It oversees about $32 billion in assets.

The acquisition was announced Tuesday before the opening of the New York Stock Exchange, with investors not taking the news well. Both firms’ shares took major hits out of the gate, with the losses holding throughout the day.

By the closing bell, Synovus shares had dropped $4.79 to $50.33 apiece, or 8.7 percent, while FCB Financial Holdings took an even bigger hit, with its stock plunging $6.95 per share to $52.25, or 11.7 percent.

The splash of the acquisition largely overshadowed the release of second quarter earnings information by Synovus. The company reported a profit, or net income, of $108.6 million, or 91 cents per diluted share, for the April-June period. That was up from $73.4 million, or 60 cents per share, in the same three-month quarter of 2017.

The profit was generated from total revenues of $359.3 million, up more than 12 percent from the same quarter a year ago.

“Having recently completed our unified brand initiative (to Synovus-only signage) and again being recognized as one of the reputable banks in the industry, I’ve never been more confident in our future and our team’s ability to win,” Stelling said on the analyst call. “The landscape is no doubt competitive and we feel the pressure every single day to raise the bar on our growth, our profitability and efficiency.”

This story was originally published July 24, 2018 at 10:04 AM.