New York Community Bancorp To Buy Flagstar In $2.6B Deal: 'Business And Cultural Integration Will Be Critical'

Flagstar Bancorp Inc FBC shares gained 8% on Monday after the company announced an acquisition deal.

What Happened? On Monday, Flagstar announced it's being acquired by New York Community Bancorp, Inc. NYCB in a stock deal valued at $2.6 billion.

Flagstar shareholders will receive 4.0151 shares of New York Community for each share of Flagstar they currently hold. The combined bank is expected to have more than $87 billion in assets and operate about 400 branches in nine different states.

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Why It’s Important: The market sees the merger as a win-win scenario for both banks given New York Community shares were also trading higher following the news.

CFRA analyst Pauline Bell upgraded New York Community from Hold to Buy and raised her price target for the stock from $11 to $14 on Monday following the merger news. In her note, Bell said the roughly 6% premium values Flagstar at a reasonable 1.15x tangible book value.

“We view the strategic potential favorably and are optimistic about the combination given the opportunities to diversify NYCB's revenue (fees: ~30%) and loan mix and improve its funding profile cutting reliance on wholesale funding sources, but business and cultural integration will be critical,” Bell said.

CFRA said Flagstar will boost New York Community’s 2022 EPS by about 16%, and its strong balance sheet and reserves will limit risk.

Benzinga’s Take: Investors will now be watching to see if Flagstar shareholders approve the deal, which appears likely at this point. In addition, investors will be on the lookout for more potential merger deals in the U.S. regional banking space.