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Valley National to Acquire Bank Leumi USA for $1.15 Billion

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(Bloomberg) -- Valley National Bancorp agreed to acquire Bank Leumi Le-Israel BM’s U.S. banking arm for about $1.15 billion in cash and stock, expanding its offerings for middle-market commercial clients and high-net-worth individuals as lenders increasingly court those customers.

Leumi shareholders will receive 3.8025 shares of Valley National stock and $5.08 in cash for each Leumi share they own, according to a statement Thursday. After the transaction is completed, Bank Leumi Le-Israel BM will own move than 14% of the common stock of Valley National, which has executive offices in New York.

A wave of consolidation is sweeping U.S. regional banks with lenders including U.S. Bancorp and PNC Financial Services Group Inc. bulking up through mergers and by purchasing foreign firms’ U.S. units, an attempt to compete with the retail-banking businesses of Wall Street giants. Earlier this week, U.S. Bancorp agreed to buy Mitsubishi UFJ Financial Group’s U.S. regional bank for about $8 billion.

And banks of all sizes have been increasingly targeting both affluent individuals and middle-market commercial clients. In June, Wells Fargo & Co. Chief Executive Officer Charlie Scharf identified services to middle-market companies as a key area of opportunity.

PNC Financial recently rebranded its wealth businesses and said it’s devoting more staff and financial resources to serving wealthy individuals as competition among lenders for affluent clients heats up, while Citizens Financial Group Inc. CEO Bruce Van Saun said this week he’s eager to expand his bank’s wealth business.

Bank Leumi USA had total assets of $8.4 billion, total deposits of $7.1 billion, and gross loans of $5.4 billion as of June 30, according to Thursday’s statement. Its parent company, one of Israel’s largest lenders, was considering a sale of its U.S. bank arm as far back as May, Bloomberg News reported at the time. Bloomberg also reported last month that Valley National was among potential buyers for the unit.

Valley National has been bulking up, agreeing in June to buy Westchester Bank Holding Corp. for about $210 million in stock to supplement its existing lending operations in New York’s Westchester County. With the most recent acquisition, Valley National will gain Bank Leumi’s commercial offices in New York, Los Angeles, Chicago, Miami and Palo Alto, California.

Valley National’s two most recent deals have been focused on revenue growth and securing top talent, Chief Executive Officer Ira Robbins said in an interview, also touting the strength of Leumi’s commercial and industrial lending business.

“Their firm does this better than our firm does,” he said. “They have a much broader product set.”

Valley National shares rose 5.1% to $12.69 at 9:51 a.m. in New York, and have gained 30% this year.

Bank Leumi Le-Israel BM has run into troubles in the U.S. in the past. In 2014, the company paid a $400 million fine linked to an investigation conducted by U.S. officials that revealed it aided American taxpayers in preparing and submitting falsified tax returns to the Internal Revenue Service.

Morgan Stanley served as financial adviser to Valley National on the purchase, and Piper Sandler Cos. advised Leumi.

(Updates with CEO comments, shares starting in eighth paragraph.)

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