Republic Bancorp Inc. and D&N Financial Corporation Announce Merger
ANN ARBOR, Mich., Dec. 1 /PRNewswire/ -- Republic Bancorp Inc. (Nasdaq:
RBNC), and D&N Financial Corporation (Nasdaq: DNFC), Troy, Michigan, today
announced the signing of a definitive agreement to merge, whereas Republic
Bancorp Inc. will be the surviving corporation.
Highlights of a combined Republic and D&N Financial organization include:
* The 4th largest bank holding company in Michigan with over $4 billion in
assets
* 180 offices including 86 retail and commercial banking offices in Michigan,
Ohio and Indiana and 94 mortgage loan production offices in 21 states
* Number One retail mortgage lender based in Michigan and the 19th largest in
the country
* Number One Small Business Administration (SBA) lender in Michigan
* Market capitalization of approximately $700 million
D&N Financial Corporation shareholders will receive 1.82 shares of
Republic Bancorp common stock for each D&N Financial Corporation share owned.
Based on Republic's closing stock price of $16.5625 on November 30, 1998, the
transaction has a total value of $286 million, and represents a price of $30.14
for each D&N Financial share. Under the terms of the agreement, the merger will
be accomplished through a tax-free exchange of shares and accounted for as a
pooling-of-interests.
"We are excited about the partnership that will result from this merger
and we believe the transaction is a win-win situation for the shareholders,
customers and employees of both institutions," commented Jerry D. Campbell,
Chairman and Chief Executive Officer of Republic Bancorp. "The combined company
should provide us the opportunity to leverage Republic's strengths in mortgage
banking and SBA lending and D&N's strengths in commercial and retail banking.
Our goal is to be one of the leading financial services providers in our home
state of Michigan. D&N will continue to operate its retail delivery system as a
stand-alone bank through the early part of the year 2000. This will allow for
the combined company to transition its operations on an orderly basis and to
provide customers with 'business as usual' banking. Our top priority is to
ensure that our customers benefit from this partnership," noted Mr. Campbell.
George J. Butvilas, President and Chief Executive Officer of D&N
Financial Corporation commented, "Customers and shareholders will benefit from
the strengths and the strategic geographical fit of the combined organization.
We will combine the best practices of each company to provide additional deposit
and loan products to our customers and to increase our market share.
Additionally, the merger will expand career opportunities for our employees and
enhance our role in the communities we serve in our home state of Michigan."
The board of directors of the combined company will include all board
members from each of the merging institutions. Jerry D. Campbell will continue
as Chairman and Chief Executive Officer of Republic Bancorp. George J. Butvilas
will become Vice Chairman and director of Republic Bancorp Inc. and remain
President and Chief Executive Officer of D&N Bank. Dana M. Cluckey will continue
as President, Chief Operating Officer and director of Republic Bancorp Inc. The
other directors of Republic Bancorp Inc. will continue to include Bruce L. Cook,
Richard J. Cramer, Sr., Dr. George A. Eastman, Howard J. Hulsman, Gary Hurand,
Dennis J. Ibold, Stephen M. Klein, John J. Lennon, Sam H. McGoun, Kelly E.
Miller, Joe D. Pentecost, Dr. Isaac J. Powell, George B. Smith, and Dr. Jeoffrey
K. Stross. The new Republic directors will include Joseph C. Bromley, Mary P.
Cauley, Steven Coleman, Stanley A. Jacobson, Randolph P. Piper, Kenneth D.
Seaton, B. Thomas M. Smith, Jr., Peter Van Pelt, and Steven E. Zack. The
corporate headquarters will be in Ann Arbor, Michigan.
It is estimated that the combined company will incur pre-tax
merger-related charges of $20 to $30 million. The transaction is expected to be
1% accretive to Republic's earnings per share in 1999, and 4% accretive to
earnings per share in 2000.
Republic and D&N Financial estimate that they will reduce their
expenses by $5 million, with approximately 33% of this savings being achieved in
1999, and the remainder being achieved in 2000. The cost savings represent 3% of
the combined organization's operating expenses. Additionally, the companies
believe there are significant opportunities for revenue synergies resulting from
mortgage, commercial and consumer loan growth and new loan and deposit products.
The merger, which was approved by the boards of directors of both
companies, is subject to normal regulatory approvals and the approval of the
shareholders of both companies. In connection with the merger agreement, D&N
Financial has granted Republic Bancorp an option on 19.9% of its outstanding
common stock. The transaction is expected to close in the second quarter of
1999.
In further action, Republic's board of directors has rescinded its
stock repurchase plan authorization.
After the closing, the combined company expects to pay cash dividends
at an annual rate of $0.32 per common share. This is equivalent to Republic
Bancorp's current dividend rate and would represent an increase of 191% on the
current dividend rate paid on D&N Financial Corporation common stock. This
transaction is not expected to have any effect on the preferred stock of D&N
Capital Corporation, a subsidiary of D&N Bank.
Since 1995, D&N Financial Corporation has been the plaintiff in a
lawsuit seeking damages from the United States of America stemming from the
government's alleged breach of contract for assurances that supervisory goodwill
from a previous combination could be considered to be regulatory capital (this
matter is commonly referenced as "the goodwill lawsuit" and is similar to those
being pursued by several other financial institutions). D&N Financial
Corporation charged-off $37 million in goodwill when its phase-out as qualifying
capital was complete. Republic Bancorp will assume the rights and duties of D&N
Financial with respect to this litigation and intends to continue the aggressive
pursuit of the case.
D&N Financial Corporation, headquartered in Troy and Hancock, Michigan,
has 53 financial services offices throughout Michigan, with a focus on the
growing Southeastern Michigan market. D&N Bank provides a wide array of
financial products and services to meet the needs of businesses and individual
consumers through its network of community banks. It also provides investment
and insurance services through D&N Investments, Inc., a licensed insurance
agency, and offers residential mortgages and home equity lines of credit through
D&N Mortgage Corporation. Preferred stock of D&N Capital Corporation, a
subsidiary of the Bank, also trades on the Nasdaq Stock Market under the symbol
DNFCP. To find out more about D&N visit its web site at www.dn.portup.com.
Republic Bancorp Inc. is a $2.1 billion registered bank holding company
with headquarters in Ann Arbor, Michigan. Republic's subsidiaries, Republic Bank
(including its subsidiaries Republic Bancorp Mortgage Inc., Market Street
Mortgage Corporation and CUB Funding Corporation) and Republic Savings Bank,
operate 127 offices in the following 21 states: Michigan, Alabama, Arizona,
California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana,
Maryland, Massachusetts, Missouri, New York, North Carolina, Ohio, Oklahoma,
Pennsylvania, Texas, Utah and Virginia. Republic is the Number One Small
Business Administration (SBA) lender in Michigan for the fifth consecutive year
and is the 22nd largest retail mortgage lender in the country having closed over
$5.5 billion in mortgages through November 1998. Information about Republic
Bancorp Inc.'s financial results, its products and services can be accessed on
the Internet at http://www.republicbancorp.com.
This news release contains certain estimates and projections regarding
Republic Bancorp Inc., D&N Financial Corporation and the combined company
following the merger, including estimates and projections relating to cost
savings, revenue enhancements and accretion that may be realized from the
merger, and certain merger-related charges expected to be incurred in connection
with the transaction. These estimates and projections constitute forward-looking
statements which involve significant risks and uncertainties. Actual results may
differ materially from the results discussed in these forward-looking
statements. Internal and external factors that might cause such a difference
include, but are not limited to: expected cost savings from the merger cannot be
fully realized or realized within the expected timeframe; revenues following the
merger may be lower than expected; competitive pressures among depository
institutions may increase significantly; costs or difficulties related to the
integration of the business of Republic and D&N Financial are greater than
expected; changes in the interest rate environment may reduce interest margins
and the fair value of financial instruments; general economic conditions may
deteriorate, either nationally or in the states in which the combined company
will be doing business; legislation or regulatory changes may adversely affect
the businesses in which the combined company would engage; and adverse changes
in the securities market.
(Summary Fact Sheet and Map of Offices Enclosed)
REPUBLIC BANCORP INC.
D&N FINANCIAL CORPORATION
December 1, 1998
Summary Fact Sheet
Combined Organization
* $4 billion in assets
* 180 offices in 21 states
* 2,200 employees
* Market capitalization of approximately $700 million
Strengths of Deal:
* 4th largest bank holding company in Michigan
* Opportunity to leverage Republic's strengths in mortgage banking
and SBA lending and D&N's strengths in commercial and retail
banking
* Strong retail banking presence in the growing Southeastern
Michigan market
Deal Structure:
* Pooling of Interests
* Tax-Free Stock Exchange
* Definitive Agreement Signed
* Due Diligence Completed
* No Caps or Collars
Terms:
* 1.82 shares of Republic Bancorp Inc. common stock for each share
of D&N Financial common stock
Pricing:
Based on November 30, 1998 Republic Bancorp Inc. closing price of
$16.5625 per share and D&N Financial of $23.0625 per share.
* Purchase Price per D&N Share = $30.14
* Price to Estimated D&N 1998 Earni= 18.2X
* Price to D&N Book Value = 247%
* Total Deal Value = $286 Million
Timing:
* Subject to normal regulatory and shareholder approvals
* Expected to close in second quarter, 1999
Advisors:
For Republic Bancorp Inc.: Roney Capital Markets
Miller, Canfield, Paddock and Stone, P.L.C.
For D&N Financial Corporation: Hovde Financial
Silver, Freedman & Taff, LLP
SOURCE Republic Bancorp Inc.
12/01/98
CONTACT: Dana M. Cluckey, President and Chief Operating Officer, or Thomas F.
Menacher, Senior Vice President, Treasurer and Chief Financial Officer,
517-725-7337, or Kristine D. Brenner, Director of Financial Reporting and
Investor Relations, 517-725-7004, all of Republic; or Kenneth R. Janson, Chief
Financial Officer, 906-487-6258, or 248-740-2252, or Mary Jo Kristapovich,
Director of Investor Relations, 906-487-6225, or 248-740-2247, both of D&N
Financial
Web site: http://www.republicbancorp.com/
Web site: http://www.dn.portup.com/
(RBNC DNFC)