425: Huntington to Acquire Cadence Bank, Creating Top 10 Bank

Huntington Bancshares announces an all-stock acquisition of Cadence Bank, aiming to become a top 10 U.S. bank with significant growth in high-growth Southern markets, particularly Texas.

Summary

• Huntington Bancshares (Huntington) announced an all-stock acquisition of Cadence Bank (Cadence).
• The transaction is valued at an aggregate consideration of $7.4 billion.
• Cadence shareholders will receive 2.475 Huntington shares for each Cadence share, resulting in a pro forma ownership split of 77% Huntington and 23% Cadence.
• The combined entity is projected to become the 10th largest bank in the U.S., covering 21 states and half the U.S. population.
• The deal is expected to be accretive to 2027 EPS by approximately 10% and increase the pro forma 2027 Return on Tangible Common Equity (ROTCE) by 200 basis points to 18%-19%.
• Huntington anticipates realizing $365 million in pretax cost synergies, representing 30% of Cadence's forecasted 2027 cash noninterest expense, with 75% realized in 2026 and full run rate in 2027.
• The acquisition will significantly expand Huntington's presence in Texas, combining with the recently closed Veritex acquisition to create a powerful platform with 144 branches and $26 billion in deposits, ranking #8 in the state.
• Dan Rollins, Cadence's Chairman and CEO, will join Huntington as Vice Chairman and a member of the Board.
• The transaction is expected to close in the first quarter of 2026, subject to shareholder and regulatory approvals.

Sentiment

Score: 9

Explanation: The filing presents a highly optimistic outlook on the acquisition, emphasizing significant financial accretion, strategic market expansion into high-growth regions, substantial cost synergies, and strong cultural alignment. Management expresses high confidence in execution and future value creation, positioning the combined entity as a top-tier regional bank.

Positives

• Creates a multi-region powerhouse, positioning Huntington as the 10th largest bank in the country.
• Provides a strategic foothold in high-growth markets across the South and immediate scale and density in Texas.
• Expected to be accretive to 2027 EPS by approximately 10%.
• Increases pro forma 2027 ROTCE by 200 basis points to 18%-19%.
• Identified significant pretax cost synergies of $365 million, representing 30% of Cadence's forecasted 2027 cash noninterest expense.
• Expands footprint to 21 states, covering half the U.S. population, with markets expected to grow 30% faster than the national average over the next 5 years.
• Combined deposit share will be top 5 in Houston and Dallas.
• Strengthens the Texas platform, making Huntington the #8 bank by deposits in Texas with 144 branches.
• Cultural alignment between Huntington and Cadence, with Cadence's CEO joining Huntington's leadership.
• The earn-back period for tangible book value dilution is 3 years.
• No branch closures are anticipated as part of the cost synergy realization.

Negatives

• The transaction is expected to result in a 7% dilution to the estimated first quarter 2026 tangible book value per share, or 2 percentage points from the third quarter 2025 level of $9.54.
• Securities restructuring will result in a modest drag of approximately $0.015 lower earnings per share in 2027, despite a longer-term positive net cash flow benefit.
• The combined entity will have a lot on its plate, managing two significant integrations (Veritex and Cadence) while driving organic growth.

Risks

• Changes in general economic, political, or industry conditions.
• Deterioration in business and economic conditions, including persistent inflation, supply chain issues, labor shortages, instability in global economic conditions, geopolitical matters, and volatility in financial markets.
• Changes in U.S. trade policies, including tariffs.
• Impact of pandemics and other catastrophic events on the global economy, financial markets, and business.
• Impacts related to or resulting from bank failures and other volatility, including potential increased regulatory requirements and costs (e.g., Federal Deposit Insurance Corporation special assessments, long-term debt, heightened capital requirements).
• Potential impacts to macroeconomic conditions affecting the ability of depository institutions to attract and retain depositors and to borrow or raise capital.
• Unexpected outflows of uninsured deposits, potentially requiring the sale of investment securities at a loss.
• Changing interest rates negatively impacting the value of the investment securities portfolio.
• Loss of value of the investment portfolio negatively impacting market perceptions and leading to deposit withdrawals.
• Effects of social media on market perceptions of banks.
• Cybersecurity risks.
• Uncertainty in U.S. fiscal and monetary policy, including Federal Reserve interest rate policies.
• Volatility and disruptions in global capital, foreign exchange, and credit markets.
• Competitive pressures on product pricing and services.
• Success, impact, and timing of business strategies, including market acceptance of new products or services.
• Changes in policies and standards for regulatory review of bank mergers.
• Occurrence of any event, change, or circumstances that could give rise to the right of one or both parties to terminate the merger agreement.
• Outcome of any legal proceedings against Huntington or Cadence.
• Delays in completing the proposed transaction.
• Failure to obtain necessary regulatory approvals (or approvals with adverse conditions).
• Failure to obtain Huntington or Cadence shareholder approval or satisfy other transaction conditions.
• Possibility that anticipated benefits are not realized when expected or at all, due to integration issues or economic/competitive factors.
• Possibility that the transaction may be more expensive to complete than anticipated.
• Ability to meet expectations regarding timing, completion, and accounting/tax treatment.
• Diversion of management's attention from ongoing business operations.
• Potential adverse reactions or changes to business, customer, or employee relationships.
• Ability to complete the transaction and integration successfully.
• Dilution caused by Huntington's issuance of additional shares.
• Other factors affecting future results of Huntington and Cadence, as detailed in their respective SEC/Federal Reserve filings.

Future Outlook

Huntington expects to become a top 10 regional banking powerhouse, well-positioned for strong growth in attractive markets, particularly Texas and the South. The combination is anticipated to drive top-tier returns and create a sustainable competitive advantage through a "flywheel" model of investment and efficiency. The company aims for 18%-19% ROTCE and 10% EPS accretion by 2027, without including any revenue synergies.

Management Comments

• "This is a very important milestone for our company, and it positions us to drive growth and to drive value creation even faster and at greater scale." Stephen D. Steinour, Chairman, President & CEO
• "Through this combination, Huntington will become a multi-region powerhouse, 10th largest bank in the country with deeply rooted strength in our core markets, a strategic foothold in high-growth markets across the South and immediate scale and density in Texas." Stephen D. Steinour, Chairman, President & CEO
• "Our combined organization will serve a dynamic and growing customer base and have a presence in 12 of the top 25 fastest-growing large MSAs and numerous fast-growing smaller ones." Stephen D. Steinour, Chairman, President & CEO
• "We are enthusiastic about the opportunity to bring the full Huntington franchise to Cadence markets. The financial opportunity is significant, and we believe our approach to delivering national scale and capabilities locally will unlock this opportunity in many powerful ways." Brantley J. Standridge, Senior EVP and President of Consumer & Regional Banking
• "By combining Huntington, Veritex and Cadence, we're building a powerful financial powerhouse in Texas, the eighth largest economy in the world." Brantley J. Standridge, Senior EVP and President of Consumer & Regional Banking
• "The deal is structured as an all-stock transaction with Cadence shareholders receiving 2.475 Huntington shares for each Cadence share, resulting in pro forma ownership split of 77% Huntington and 23% Cadence." Zachary J. Wasserman, CFO & Senior EVP
• "The transaction is expected to be accretive to 2027 earnings per share by 10% and to return on tangible common equity by 200 basis points." Zachary J. Wasserman, CFO & Senior EVP
• "We have identified $365 million in pretax cost synergies, representing 30% of Cadence's forecasted 2027 cash noninterest expense. Our teams have mapped out specific actions and time lines, and we have a high confidence in our ability to meet or exceed these estimates." Zachary J. Wasserman, CFO & Senior EVP
• "We've had 4 months of very detailed planning here. Dan Rollins and team have just been exceptionally good partners. And Brant and our teams here have gotten into this in great detail. This is the most advanced I've ever seen us or my predecessor be positioned at point of announcement to execute by far." Stephen D. Steinour, Chairman, President & CEO

Industry Context

The banking industry is seeing consolidation, with regional banks seeking scale and efficiency to compete. This merger positions Huntington to capitalize on high-growth Southern markets, particularly Texas, which is described as the 8th largest economy in the world and a leader in U.S. population growth. The focus on organic growth alongside strategic acquisitions reflects a trend among larger regional banks to expand their footprint and capabilities.

Comparison to Industry Standards

• The combined entity will become the 10th largest bank in the country, indicating a significant scale increase relative to many regional peers.
• The target of 18%-19% ROTCE for 2027 is described as "top-tier among regional banks," suggesting it aims to exceed average industry returns.
• The 30% cost synergy target (of Cadence's noninterest expense) is substantial for a large combination, indicating a rigorous approach to efficiency, comparable to or exceeding typical merger synergy targets.
• The 3-year earn-back period for tangible book value dilution is generally considered favorable for a transaction of this size.
• The strategy of combining with Veritex and Cadence to build a "powerful financial powerhouse in Texas" positions Huntington to compete with other large national and regional banks that have significant presences in this high-growth market.

Management Changes

Corporate Governance

Legal Proceedings

• The filing mentions "the outcome of any legal proceedings that may be instituted against Huntington or Cadence" as a risk factor, but does not detail any specific ongoing or new legal proceedings related to the merger itself or the companies.

Stakeholder Impact

• Shareholders (Huntington): Expected to benefit from 10% EPS accretion and 200 basis points ROTCE increase by 2027, and long-term value creation from expanded market presence and synergies.
• Shareholders (Cadence): Will receive 2.475 Huntington shares for each Cadence share, becoming Huntington shareholders.
• Customers: Will gain access to the full Huntington franchise, including a broader suite of products, enhanced digital tools, and capital market services.
• Employees (Cadence): Key operating centers in Tupelo, Birmingham, and Houston will remain important colleague locations. Management emphasizes a "partnership approach" and efforts to retain key colleagues.
• Communities: Huntington's commitment to local communities and relationship-driven approach is highlighted, suggesting continued local presence and investment.

Next Steps

• Internal communication regarding personnel selections in the coming weeks.
• Management team to conduct 23 stops over the next 2 weeks to engage and retain colleagues.
• Huntington will file a Registration Statement on Form S-4 including a Joint Proxy Statement/Prospectus with the SEC.
• Shareholder approval from both Huntington and Cadence.
• Regulatory approval from the OCC.
• Closing of the transaction in Q1 2026.
• Conversion for the Veritex integration planned for early Q1 2026.
• Integration of Cadence Bank, with 75% of cost synergies realized in 2026 and full run rate in 2027.
• Continued investment in the business to drive organic growth and competitive advantage.

Key Dates

Recommendation

The acquisition of Cadence Bank by Huntington Bancshares is highly strategic and financially compelling. The deal is expected to be 10% accretive to 2027 EPS and significantly boost ROTCE by 200 basis points to a top-tier 18-19%. The identified $365 million in cost synergies are substantial and management expresses high confidence in their realization. The expansion into high-growth Southern markets, particularly Texas, creates a powerful platform for accelerated organic growth and competitive advantage. The 3-year tangible book value earn-back period is favorable, and the cultural alignment and integration plan appear robust. While there is some short-term dilution and integration risk, the long-term value creation potential and enhanced market position make this a strong buy.

Keywords

Bank Merger, Acquisition, Huntington Bancshares, Cadence Bank, Financial Services, Regional Banking, Texas Market, Deposit Growth, Cost Synergies, EPS Accretion, ROTCE, Shareholder Value, M&A, Commercial Banking, Consumer Banking