Chemical Financial and TCF Financial signed a definitive agreement under which TCF will merge into Chemical in an all-stock merger of equals transaction. The combined company will operate under the TCF name.

Under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, TCF will merge into Chemical, and the combined holding company and bank will operate under the TCF name and brand following the closing of the transaction.

The merger will create a combined company with approximately $45 billion in assets, $34 billion in total deposits and more than 500 branches across nine states, including four of the top 10 Midwest markets. It will leverage the strengths of Chemical’s community banking and wealth management capabilities with TCF’s large deposit franchise and expertise in wholesale lending on a national basis.

“With a shared strategic vision and increased scale and capabilities, our two complementary banking platforms will be positioned to better serve our customers and communities,” said Chemical Chairman Gary Torgow. “The combination of TCF and Chemical creates the largest midcap bank in the Midwest, poised to deliver double-digit EPS accretion for each set of shareholders, significant cost synergies, top-tier return metrics, a more diversified balance sheet and a lower risk profile. We also share a deep commitment to supporting and giving back to the communities we serve.”

The merger will create a more diversified deposit mix between retail and commercial business lines and a more balanced loan portfolio across geographies, asset classes and commercial industries. On a combined basis, the company expects to have increased capacity for loan growth while maintaining its current risk thresholds.

The transaction is projected to deliver 17% EPS accretion to Chemical and 31% EPS accretion to TCF by 2020, with a tangible book value earn-back period of 2.7 years.

In addition, the transaction is expected to generate approximately $180 million in annual run-rate cost synergies by 2020, with minimal reductions in branches.

Under the terms of the agreement, TCF shareholders will receive 0.5081 shares of Chemical common stock for each share of TCF common stock based on a fixed exchange ratio, equivalent to $21.58 per TCF share based on the closing price as of January 25, 2019. Each outstanding share of 5.70% Series C non-cumulative perpetual preferred stock of TCF will be converted into the right to receive one share of a newly created series of preferred stock of Chemical. Upon completion of the deal, TCF and Chemical shareholders will own 54% and 46% of the combined company, respectively, on a fully diluted basis.

The merger is expected to close in the late third or early fourth quarter of 2019, subject to customary closing conditions, including receipt of customary regulatory approvals and approval by the shareholders of each company. Both boards of directors have already approved the transaction.

Keefe, Bruyette & Woods will act as financial advisor to, and rendered a fairness opinion for, Chemical, while Nelson Mullins Riley & Scarborough, and Wachtell, Lipton, Rosen & Katz will serve as its legal counsel. J.P. Morgan Securities acted as lead financial advisor to, and rendered a fairness opinion to, TCF, while Perkins Advisors acts as its financial advisor and Simpson Thacher & Bartlett as its legal counsel.