8-K: Old National Bancorp to Acquire Bremer Financial Corporation in $1.4 Billion Deal

Old National Bancorp is set to acquire Bremer Financial Corporation for approximately $1.4 billion, expanding its presence in the Midwest.

Summary

• Old National Bancorp (ONB) and Bremer Financial Corporation (BFC) have entered into a definitive merger agreement.
• The transaction is valued at approximately $1.4 billion, or $116.76 per share of Bremer common stock, based on ONBs closing stock price on November 22, 2024.
• Each share of Bremer common stock will be converted into the right to receive 4.182 shares of ONB common stock plus $26.22 in cash.
• The combined organization will have over $70 billion in assets, based on September 30, 2024 figures.
• The merger will expand ONBs footprint into Minnesota, North Dakota, and Wisconsin.
• The Otto Bremer Trust will have an approximate 11% ownership stake in Old National and a Trustee will join the Old National Board of Directors.
• The transaction is expected to close in the middle of 2025, subject to customary closing conditions and regulatory approvals.

Sentiment

Score: 8

Explanation: The document presents a positive outlook on the merger, highlighting strategic and financial benefits. The tone is optimistic and confident, suggesting a strong belief in the success of the transaction.

Positives

• The merger will create the third-largest bank in the Twin Cities.
• The partnership expands Old Nationals reach into several vibrant markets throughout Minnesota, North Dakota and Wisconsin.
• The combined organization will have a significantly larger footprint and offer additional banking capabilities and enhanced resources to serve customers.
• The partnership represents an outstanding fit between two highly compatible, relationshipand community-focused banks.
• The Otto Bremer Trust will have an approximate 11% ownership stake in Old National and a Trustee will join the Old National Board of Directors.

Risks

• The transaction is subject to customary closing conditions and regulatory approvals, including the approval of Bremer shareholders.
• The transaction may not close when expected or at all due to failure to obtain necessary approvals or satisfy other closing conditions.
• The anticipated benefits of the transaction, including cost savings and strategic gains, may not be realized when expected or at all.
• The integration of the two companies may be more difficult, time-consuming, or costly than expected.
• There may be potential adverse reactions from customers or changes to business or employee relationships.
• A material adverse change in the financial condition of Old National or Bremer could impact the transaction.
• Changes in Old Nationals share price before closing could impact the transaction.
• There are risks relating to the potential dilutive effect of shares of Old Nationals common stock to be issued in the proposed transaction.

Future Outlook

The combined organization is expected to have a larger footprint, additional banking capabilities, and enhanced resources to serve customers. The transaction is anticipated to close in the middle of 2025.

Management Comments

• Old National Chairman and CEO Jim Ryan stated that the partnership represents an outstanding fit between two highly compatible, relationshipand community-focused banks.
• Bremer President and CEO Jeanne Crain expressed confidence that Old National is a great fit and will continue the legacy of Otto Bremer.
• The Otto Bremer Trust commented that the partnership expands the scope of what can be accomplished for and within our communities.

Industry Context

This announcement reflects a trend of consolidation in the banking industry, with larger institutions seeking to expand their market presence and capabilities through strategic acquisitions. The merger will create a significant regional player in the Midwest.

Comparison to Industry Standards

• The transaction values Bremer at approximately 1.00x tangible book value and 6.1x 2025E EPS with cost savings, which is within the range of recent bank mergers.
• The pro forma combined company is expected to have a 2026E ROAA of ~1.3% and ROTCE of 18.4%, which would place it among the top performing regional banks.
• The expected 2.0 year tangible book value per share earnback period is considered favorable compared to industry averages.
• The pro forma CET1 ratio of ~10.2% at close is considered strong and provides strategic optionality.
• The pro forma loan to deposit ratio of ~84% is within industry standards.

Management Changes

Stakeholder Impact

• Shareholders of Bremer will receive a combination of Old National stock and cash.
• The Otto Bremer Trust will become a significant shareholder in Old National and have a board seat.
• Customers of both banks will have access to a larger network and enhanced services.
• Employees of both banks will be integrated into the combined organization.
• Communities served by both banks will benefit from increased investment and support.

Next Steps

• Bremer shareholders will vote on the merger agreement.
• Old National and Bremer will seek regulatory approvals.
• The transaction is expected to close in the middle of 2025.

Key Dates

Keywords

merger, acquisition, Old National Bancorp, Bremer Financial Corporation, banking, financial services, Otto Bremer Trust, Midwest, Twin Cities, regulatory approvals