Huntington to buy Cadence for $7.4 billion as US bank deals heat up

By Manya Saini

Oct 27 (Reuters) - Huntington Bancshares HBAN.O agreed to buy smaller rival Cadence Bank CADE.N for $7.4 billion in an all-stock deal on Monday, underscoring a broader push by regional lenders to grow their footprint and compete with larger banks.

Dealmaking has gathered pace under the Trump administration, which has pledged to simplify and speed up merger approvals, while analysts say the highly fragmented U.S. banking system leaves ample room for consolidation.

Regional lenders are also pursuing mergers to diversify revenue, strengthen balance sheets and expand in faster-growing markets as they strive to compete with larger rivals.

The deal will create a bank with assets of $276 billion, deposits of $220 billion and $184 billion in loans and leases.

"The combination with Cadence creates a top-ten regional banking powerhouse that is well-positioned to grow in attractive markets and with a powerful platform for further investment," Huntington CEO Steve Steinour said on a conference call with analysts.

Huntington said it will issue 2.475 shares for each outstanding share of Cadence common stock.

Cadence shares rose 5% in morning trading.

SPOTLIGHT ON DEALS

"We had four months of very detailed planning here," Steinour told analysts, referring to the Cadence deal. "We've made a focus of ensuring we understand their markets, their operating model and their people."

Huntington's long-time top boss said both companies share similar cultures and is "highly confident" the bank can retain all key Cadence employees through the integration.

The lender's shares were last down 2.5% in early trading, paring some premarket losses.

"The tangible book value dilution, pausing the buyback until close, and general deal volatility may pressure (Huntington) shares over the near-term," analysts at brokerage Stephens wrote in a note.

In July, Huntington agreed to acquire Texas-based Veritex in a $1.9 billion all-stock deal, which closed last week.

Executives at Huntington said the Cadence deal was complementary and added the integration of Veritex was "going quite well".

Rival Fifth Third FITB.O agreed to buy regional lender Comerica CMA.N in the year's largest bank deal so far, valued at $10.9 billion.

EXPANSION DRIVE

The deal will see Huntington expand to 21 states in the U.S. with a foothold in high-growth markets, including Houston, Dallas, Fort Worth and Austin.

Steinour said Huntington has targeted growth in Texas. The Lone Star State has emerged as a financial services hub in recent years, with lofty ambitions to rival New York as the country's center of finance.

Huntington raised its medium-term performance targets, citing expense synergies and enhanced earnings potential from the deal, and now expects return on tangible common equity (ROTCE) of 18% to 19%, up from its previous target of 16% to 17%.

ROTCE is a key measure of how effectively a bank is using its core capital to grow profits for its shareholders.

"Huntington has been on the path to expanding in Texas and the Southeast and we believe this acquisition fits nicely into that expansion strategy," analysts at RBC Capital Markets wrote in a note.

The Wall Street Journal was the first to report the deal, which is expected to close in the first quarter of 2026.

Evercore and BofA Securities served as financial advisors to Huntington, while Keefe, Bruyette & Woods advised Cadence on the deal.