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Section 1: DEFM14A (DEFM14A)

DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.     )

Filed by the Registrant  ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under §240.14a-12
TCF FINANCIAL CORPORATION
(Name of Registrant as Specified in its Charter)
    
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

   

 

  (2)  

Aggregate number of securities to which transaction applies:

 

   

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

   

 

  (4)  

Proposed maximum aggregate value of transaction:

 

   

 

  (5)  

Total fee paid:

 

   

 

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

   

 

  (2)  

Form, Schedule or Registration Statement No.:

 

   

 

  (3)  

Filing Party:

 

   

 

  (4)  

Date Filed:

 

   

 

 

 

 


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LOGO    LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

May 2, 2019

To the Shareholders of Chemical Financial Corporation and TCF Financial Corporation:

On January 27, 2019, Chemical Financial Corporation, which we refer to as Chemical, and TCF Financial Corporation, which we refer to as TCF, entered into an Agreement and Plan of Merger, which we refer to as the merger agreement, pursuant to which Chemical and TCF have agreed to combine their respective businesses in a merger of equals. Under the merger agreement, TCF will merge with and into Chemical, with Chemical as the surviving corporation, in a transaction that we refer to as the merger. Immediately following the merger or at such later time as the parties may mutually agree, Chemical’s wholly-owned subsidiary, Chemical Bank, a Michigan banking corporation, will merge with and into TCF’s wholly-owned subsidiary, TCF National Bank, a national banking association, with TCF National Bank as the surviving bank. At the effective time of the merger, Chemical will change its name to “TCF Financial Corporation.”

If the merger is completed, each outstanding share of TCF common stock, par value $0.01 per share, which we refer to as TCF common stock, except for treasury stock or shares owned by TCF or Chemical, in each case, other than in a fiduciary or agency capacity or as a result of debts previously contracted, will be converted into the right to receive 0.5081 shares, such shares referred to as the merger consideration, of Chemical common stock, par value $1.00 per share, which we refer to as Chemical common stock. The value of the merger consideration will depend on the market price of Chemical common stock on the effective date of the merger.

In addition, each outstanding share of TCF 5.70% Series C Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, which we refer to as TCF Series C preferred stock, and each related depositary share, will be converted into the right to receive, without interest, one share of a newly created series of Chemical preferred stock designated as Chemical 5.70% Series C Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, which we refer to as Chemical Series C preferred stock, and one depositary share, respectively, with equivalent rights and preferences.

Chemical common stock is listed on the Nasdaq Stock Market, or NASDAQ, under the symbol “CHFC.” TCF common stock is listed on the New York Stock Exchange, or NYSE, under the symbol “TCF.” Following the merger, the common stock of the combined company will be listed on NASDAQ under the symbol “TCF.” The depositary shares issued in exchange for the depositary shares related to the TCF Series C preferred stock are also expected to be listed on NASDAQ.

Based on the closing price of Chemical common stock on NASDAQ, on January 25, 2019, the last trading day before public announcement of the merger, of $42.47, the value of the per share merger consideration


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payable to holders of TCF common stock would be $21.58. Based on the closing price of Chemical common stock on NASDAQ on May 1, 2019, the last practicable trading date before the date of this joint proxy statement/prospectus, of $43.26, the value of the per share merger consideration payable to holders of TCF common stock would be $21.98. We urge you to obtain current market quotations for both Chemical common stock and TCF common stock.

Based on the number of shares of TCF common stock outstanding as of May 1, 2019, the total number of shares of Chemical common stock expected to be issued in connection with the merger is approximately 83.4 million. In addition, based on the number of outstanding shares of Chemical common stock and TCF common stock as of May 1, 2019, and based on the exchange ratio of 0.5081, it is expected that Chemical shareholders will hold approximately 46.2% and TCF shareholders will hold approximately 53.8% of the issued and outstanding shares of Chemical common stock immediately following the closing of the merger. Based on the number of shares of TCF Series C preferred stock and the number of depositary shares, each representing a 1/1,000th interest in a share of TCF Series C preferred stock, outstanding as of May 1, 2019, the total number of shares of Chemical Series C preferred stock expected to be issued in connection with the merger is 7,000 and the total number of depositary shares expected to be issued in respect of the Chemical Series C preferred stock is 7,000,000.

Chemical will hold a special meeting of its shareholders, which we refer to as the Chemical special meeting, on June 7, 2019, at 10:00 a.m. local time, at the Somerset Inn, 2601 West Big Beaver Road, Troy, Michigan 48084, where the Chemical shareholders will be asked to vote on a proposal to approve the merger agreement, which we refer to as the Chemical merger proposal, a proposal to amend the Chemical articles of incorporation to increase the number of authorized shares of Chemical common stock and to change the name of Chemical to “TCF Financial Corporation,” effective only upon completion of the merger, which we refer to as the Chemical articles amendment proposal, and other related matters. TCF will hold a special meeting of its shareholders, which we refer to as the TCF special meeting, on June 7, 2019, at 9:00 a.m. local time, at the TCF Minnetonka office, 11100 Wayzata Boulevard, Minnetonka, Minnesota 55305, where the TCF shareholders will be asked to vote on a proposal to adopt the merger agreement, which we refer to as the TCF merger proposal, and other related matters. The merger cannot be completed unless, among other things, holders of a majority of the issued and outstanding shares of Chemical common stock vote to approve the Chemical merger proposal and the Chemical articles amendment proposal and holders of a majority of the issued and outstanding shares of TCF common stock vote to approve the TCF merger proposal. Chemical and TCF are sending you this joint proxy statement/prospectus to ask you to vote in favor of these and other matters described in this joint proxy statement/prospectus.

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF CHEMICAL COMMON STOCK OR TCF COMMON STOCK YOU OWN. To ensure your representation at the Chemical special meeting or TCF special meeting, as applicable, please complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope or submit your proxy by telephone or via the Internet by following the instructions in the enclosed joint proxy statement/prospectus and on your proxy card. Please vote promptly whether or not you expect to attend your meeting of shareholders. Submitting a proxy now will NOT prevent you from being able to vote in person at your meeting of shareholders. If you hold your shares in “street name,” you should instruct your broker, bank or other nominee how to vote in accordance with the voting instruction form you receive from your broker, bank or other nominee.

The Chemical board of directors has unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of Chemical and its shareholders and (ii) adopted the merger agreement and approved the execution and delivery of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, the issuance of shares of Chemical common stock and Chemical Series C preferred stock and related depositary shares in connection with the transactions contemplated by the merger agreement and the amendment to the Chemical articles of incorporation. The Chemical board of directors unanimously recommends that Chemical shareholders vote “FOR” the Chemical merger proposal, “FOR” the Chemical articles amendment proposal and “FOR” the other matters to be considered at the Chemical special meeting.


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The TCF board of directors has unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of TCF and its shareholders and declared that the merger agreement is advisable and (ii) approved the execution of the merger agreement and the consummation of the transactions contemplated thereby, including the merger. The TCF board of directors unanimously recommends that the TCF shareholders vote “FOR” the TCF merger proposal and “FOR” the other matters to be considered at the TCF special meeting.

This joint proxy statement/prospectus provides you with detailed information about the merger agreement and the merger. It also contains or references information about Chemical and TCF and certain related matters. You are encouraged to read this joint proxy statement/prospectus carefully. In particular, you should read the “Risk Factors” section beginning on page 31 for a discussion of the risks you should consider in evaluating the proposed merger and how it will affect you. You can also obtain information about Chemical and TCF from documents that have been filed with the Securities and Exchange Commission that are incorporated into this joint proxy statement/prospectus by reference.

Sincerely,

 

David T. Provost

Chief Executive Officer and President

Chemical Financial Corporation

  

Craig R. Dahl

Chairman, President and Chief Executive Officer

TCF Financial Corporation

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger, the issuance of shares of Chemical common stock or Chemical Series C preferred stock in connection with the merger or the other transactions described in this joint proxy statement/prospectus, or passed upon the adequacy or accuracy of the disclosure in this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

The securities to be issued in connection with the merger are not savings accounts, deposits or other obligations of any bank or savings association and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

This joint proxy statement/prospectus is dated May 2, 2019, and is first being mailed to Chemical shareholders and TCF shareholders on or about May 7, 2019.


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LOGO

NOTICE OF THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 7, 2019

To the Shareholders of Chemical Financial Corporation:

We are pleased to invite you to attend the special meeting of shareholders, which we refer to as the Chemical special meeting, of Chemical Financial Corporation, which we refer to as Chemical, to be held on June 7, 2019 at 10:00 a.m. local time, at the Somerset Inn, 2601 West Big Beaver Road, Troy, Michigan 48084, for the following purposes:

1.    To consider and vote on a proposal to approve the Agreement and Plan of Merger, dated as of January 27, 2019, by and between Chemical and TCF Financial Corporation, which we refer to as TCF, as it may be amended from time to time, which we refer to as the merger agreement, a copy of which is included as Annex A to the joint proxy statement/prospectus of which this notice is a part, under which TCF will merge with and into Chemical, which we refer to as the Chemical merger proposal;

2.    To consider and vote on a proposal to approve an amendment to Chemical’s articles of incorporation to (a) increase the number of authorized shares of Chemical common stock from 135 million to 220 million, and (b) change the name of Chemical to “TCF Financial Corporation,” effective only upon consummation of the merger, a copy of which is attached as Exhibit 2 to Annex A, which we refer to as the Chemical articles amendment proposal;

3.     To consider and vote on a proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to the named executive officers of Chemical that is based on or otherwise relates to the merger, which we refer to as the Chemical compensation proposal; and

4.    To consider and vote on the proposal to adjourn the Chemical special meeting, if necessary or appropriate, to permit further solicitation of proxies in favor of the Chemical merger proposal or Chemical articles amendment proposal, which we refer to as the Chemical adjournment proposal.

The Chemical board of directors has set May 1, 2019 as the record date for the Chemical special meeting. Only holders of record of Chemical common stock at the close of business on May 1, 2019 will be entitled to notice of and to vote at the Chemical special meeting and any adjournments or postponements thereof.

The affirmative vote of a majority of the issued and outstanding shares of Chemical common stock entitled to vote thereon is required to approve each of the Chemical merger proposal and the Chemical articles amendment proposal. Assuming a quorum is present, approval of each of the Chemical compensation proposal and the Chemical adjournment proposal requires the affirmative vote of a majority of the votes cast on each such proposal at the Chemical special meeting. Chemical will transact no other business at the Chemical special meeting, except for business properly brought before the Chemical special meeting or any adjournment or postponement thereof.

Chemical shareholders must approve both the Chemical merger proposal and the Chemical articles amendment proposal in order for the merger to occur. If Chemical shareholders fail to approve either the Chemical merger proposal or the Chemical articles amendment proposal, the merger will not occur. The joint proxy statement/prospectus accompanying this notice explains the merger agreement and the transactions contemplated thereby, as well as the proposals to be considered at the Chemical special meeting. Please carefully review the joint proxy statement/prospectus, including the annexes thereto and the documents incorporated by reference therein.


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YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF CHEMICAL COMMON STOCK YOU OWN. Whether or not you plan to attend the Chemical special meeting, please complete, sign, date and return the enclosed proxy card by using the enclosed postage-paid envelope provided at your earliest convenience. You may also submit a proxy by telephone or via the Internet by following the instructions in the enclosed joint proxy statement/prospectus and on your proxy card. If you hold your shares in “street name” through a broker, bank or other nominee, you should direct the vote of your shares in accordance with the voting instruction form received from your broker, bank or other nominee.

The Chemical board of directors has unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of Chemical and its shareholders and (ii) adopted the merger agreement and approved the execution and delivery of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, the issuance of shares of Chemical common stock and Chemical Series C preferred stock and related depositary shares in connection with the transactions contemplated by the merger agreement and the amendment to the Chemical articles of incorporation. The Chemical board of directors unanimously recommends that Chemical shareholders vote “FOR” the Chemical merger proposal, “FOR” the Chemical articles amendment proposal, “FOR” the Chemical compensation proposal and “FOR” the Chemical adjournment proposal.

If you have any questions or need assistance with voting, please contact our proxy solicitor, D.F. King & Co., Inc., by calling (212) 269-5550, or toll-free at (800) 309-2984.

If you plan to attend the Chemical special meeting, please bring valid photo identification. Chemical shareholders that hold their shares of Chemical common stock in “street name” are required to bring valid photo identification and proof of stock ownership in order to attend the Chemical special meeting, and, if you intend to vote the shares at the meeting, a legal proxy, executed in such shareholder’s favor, from the record holder of such shareholder’s shares, such as a broker, bank or other nominee.

 

BY ORDER OF THE BOARD OF DIRECTORS,
LOGO
David T. Provost
Chief Executive Officer and President

May 2, 2019

Detroit, Michigan


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LOGO

NOTICE OF THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 7, 2019

To the Shareholders of TCF Financial Corporation:

We are pleased to invite you to attend the special meeting of shareholders, which we refer to as the TCF special meeting, of TCF Financial Corporation, which we refer to as TCF, to be held on June 7, 2019 at 9:00 a.m. local time, at the TCF Minnetonka office, 11100 Wayzata Boulevard, Minnetonka, Minnesota 55305, for the following purposes:

 

  1.

To consider and vote on the proposal to adopt the Agreement and Plan of Merger, dated as of January 27, 2019, by and between Chemical Financial Corporation, which we refer to as Chemical, and TCF, as it may be amended from time to time, which we refer to as the merger agreement, a copy of which is included as Annex A to the joint proxy statement/prospectus of which this notice is a part, under which TCF will merge with and into Chemical, which we refer to as the TCF merger proposal;

 

  2.

To consider and vote on the proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to TCF’s named executive officers that is based on or otherwise relates to the merger, which we refer to as the TCF compensation proposal; and

 

  3.

To consider and vote on the proposal to adjourn the TCF special meeting, if necessary or appropriate to permit further solicitation of proxies in favor of the TCF merger proposal, which we refer to as the TCF adjournment proposal.

The TCF board of directors has set April 30, 2019 as the record date for the TCF special meeting. Only holders of record of TCF common stock at the close of business on April 30, 2019 will be entitled to notice of and to vote at the TCF special meeting and any adjournments or postponements thereof. Any shareholder entitled to attend and vote at the TCF special meeting is entitled to appoint a proxy to attend and vote on such shareholder’s behalf. Such proxy need not be a holder of TCF common stock.

The affirmative vote of a majority of the outstanding shares of TCF common stock entitled to vote thereon is required to approve the TCF merger proposal. Assuming a quorum is present, approval of each of the TCF compensation proposal and TCF adjournment proposal requires the affirmative vote of a majority of the shares of TCF common stock represented at the TCF special meeting, in person or by proxy, that are entitled to vote on such proposal. TCF will transact no other business at the special meeting, except for business properly brought before the TCF special meeting or any adjournment or postponement thereof.

TCF shareholders must approve the TCF merger proposal in order for the merger to occur. If TCF shareholders fail to approve the TCF merger proposal, the merger will not occur. The merger is not conditioned on the approval of the TCF compensation proposal. The joint proxy statement/prospectus accompanying this notice explains the merger agreement and the transactions contemplated thereby, as well as the proposals to be considered at the TCF special meeting. Please carefully review the joint proxy statement/prospectus, including the annexes thereto and the documents incorporated by reference therein.

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF TCF COMMON STOCK YOU OWN. Whether or not you plan to attend the TCF special meeting, please complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided at your earliest convenience. You may also submit a proxy by telephone or via the Internet by following the instructions in the enclosed joint proxy statement/prospectus and on your proxy card. If you hold your shares in “street name” through a broker, bank or other nominee, you should direct the vote of your shares in accordance with the voting instruction form received from your broker, bank or other nominee.


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The TCF board of directors has unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of TCF and its shareholders and declared that the merger agreement is advisable and (ii) approved the execution of the merger agreement and the consummation of the transactions contemplated thereby, including the merger. The TCF board of directors unanimously recommends that the TCF shareholders vote “FOR” the TCF merger proposal, “FOR” the TCF compensation proposal and “FOR” the TCF adjournment proposal.

If you have any questions or need assistance with voting, please contact our proxy solicitor, Georgeson LLC, by calling toll-free at (800) 676-0098.

If you plan to attend the TCF special meeting in person, please bring valid photo identification. TCF shareholders that hold their shares of TCF common stock in “street name” are required to bring valid photo identification and proof of stock ownership in order to attend the TCF special meeting, and, if you intend to vote the shares at the meeting, a legal proxy, executed in such shareholder’s favor, from the record holder of such shareholder’s shares, such as a broker, bank or other nominee.

 

BY ORDER OF THE BOARD OF DIRECTORS,
LOGO
Craig R. Dahl
Chairman, President and Chief Executive Officer
Wayzata, Minnesota


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WHERE YOU CAN FIND MORE INFORMATION

Both Chemical and TCF file annual, quarterly and special reports, proxy statements and other business and financial information with the Securities and Exchange Commission (the “SEC”). In addition, Chemical and TCF file reports and other business and financial information with the SEC electronically, and the SEC maintains a website located at www.sec.gov containing this information. You will also be able to obtain these documents, free of charge, from Chemical at www.chemicalbank.com under the tab “Investor Information” and then under the heading “Financial Information” and then “SEC Filings,” or from TCF at www.tcfbank.com under the tab “About TCF” then under the tab “Investor Relations,” and then under the heading “Financial Information” and then “SEC Filings.”

Chemical has filed a registration statement on Form S-4 of which this joint proxy statement/prospectus forms a part. As permitted by SEC rules, this joint proxy statement/prospectus does not contain all of the information included in the registration statement or in the exhibits or schedules to the registration statement. You may obtain a free copy of the registration statement, including any amendments, schedules and exhibits at the addresses set forth below. Statements contained in this joint proxy statement/prospectus as to the contents of any contract or other documents referred to in this joint proxy statement/prospectus are not necessarily complete. In each case, you should refer to the copy of the applicable contract or other document filed as an exhibit to the registration statement. This joint proxy statement/prospectus incorporates by reference documents that Chemical and TCF have previously filed with the SEC. These documents contain important information about the companies and their financial condition. See “Incorporation of Certain Documents by Reference” beginning on page 163. These documents are available without charge to you upon written or oral request to the applicable company’s principal executive offices. The respective addresses and telephone numbers of such principal executive offices are listed below.

 

Chemical Financial Corporation
333 W. Fort Street, Suite 1800
Detroit, Michigan
Attention: Investor Relations
(800) 867-9757
   TCF Financial Corporation
200 Lake Street East, EXO-01-G
Wayzata, Minnesota 55391
Attention: Investor Relations
(952) 745-2760

If you have any questions regarding the accompanying joint proxy statement/prospectus, you may contact D.F. King & Co., Inc., Chemical’s proxy solicitor, by calling (212) 269-5550, or toll-free at (800) 309-2984, or Georgeson LLC, TCF’s proxy solicitor, by calling toll-free at (800) 676-0098.

To obtain timely delivery of these documents, you must request the information no later than May 31, 2019 in order to receive them before Chemical’s special meeting and no later than May 31, 2019 in order to receive them before TCF’s special meeting.


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ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the SEC by Chemical, constitutes a prospectus of Chemical under Section 5 of the Securities Act of 1933, as amended, referred to as the Securities Act, with respect to the shares of Chemical common stock and preferred stock to be offered to TCF shareholders in connection with the merger. This joint proxy statement/prospectus also constitutes a joint proxy statement for both Chemical and TCF under Section 14(a) of the Securities Exchange Act of 1934, as amended, referred to as the Exchange Act. It also constitutes a notice of meeting with respect to the Chemical special meeting of shareholders and a notice of meeting with respect to the TCF special meeting of shareholders.

No person has been authorized to give any information or make any representation about the merger or Chemical or TCF that differs from, or adds to, the information in this joint proxy statement/prospectus or in documents that are publicly filed with the SEC. We take no responsibility for, and provide no assurance as to the reliability of, any other information that others may give you. You should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than the date of this joint proxy statement/prospectus, and neither the mailing of this joint proxy statement/prospectus to Chemical shareholders and TCF shareholders nor the issuance of Chemical common stock and preferred stock in the merger shall create any implication to the contrary.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

All references in this joint proxy statement/prospectus to “Chemical” refer to Chemical Financial Corporation, a Michigan corporation and all references to “Chemical Bank” refer to Chemical Bank, a Michigan state-chartered bank. All references in this joint proxy statement/prospectus to “TCF” refer to TCF Financial Corporation, a Delaware corporation and all references to “TCF Bank” refer to TCF National Bank, a national banking association. All references in this joint proxy statement/prospectus to the “combined company” refer to Chemical immediately following completion of the merger. All references in this joint proxy statement/prospectus to “Chemical common stock” refer to the common stock of Chemical, par value $1.00 per share, and all references in this joint proxy statement/prospectus to “TCF common stock” refer to the common stock of TCF, par value $0.01 per share. All references in this joint proxy statement/prospectus to “Chemical Series C preferred stock” refer to the Chemical 5.70% Series C Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, and all references in this joint proxy statement/prospectus to “TCF Series C preferred stock” refer to the TCF 5.70% Series C Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share. All references in this joint proxy statement/prospectus to the “merger agreement” refer to the Agreement and Plan of Merger dated January 27, 2019, by and between Chemical and TCF. All references in this joint proxy statement/prospectus to “we,” “our” and “us” refer to Chemical and TCF collectively, unless otherwise indicated or as the context requires.

 


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE MEETINGS

     1  

SUMMARY

     11  

The Merger

     11  

Merger Consideration

     11  

Treatment of TCF Preferred Stock

     11  

Treatment of TCF Equity Awards

     11  

Recommendation of the Chemical Board of Directors

     12  

Recommendation of the TCF Board of Directors

     12  

Opinion of Chemical’s Financial Advisor

     12  

Opinion of TCF’s Financial Advisor

     13  

Chemical Special Meeting of Shareholders

     13  

TCF Special Meeting of Shareholders

     14  

Interests of Chemical Directors and Executive Officers in the Merger

     14  

Interests of TCF Directors and Executive Officers in the Merger

     15  

Governance Matters

     16  

Litigation Relating to the Merger

     17  

Regulatory Approvals Required for the Merger

     17  

Conditions to the Merger

     17  

Agreement Not to Solicit Other Offers

     18  

Termination; Termination Fee

     18  

Amendment, Waiver and Extension of the Merger Agreement

     20  

No Appraisal or Dissenter Rights

     20  

Comparison of Rights of TCF Shareholders and Chemical Shareholders

     20  

Risk Factors

     20  

Accounting Treatment of the Merger

     20  

Material U.S. Federal Income Tax Consequences of the Merger

     20  

The Parties

     21  

SELECTED HISTORICAL FINANCIAL DATA FOR CHEMICAL

     22  

SELECTED HISTORICAL FINANCIAL DATA FOR TCF

     24  

SUMMARY UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL INFORMATION

     26  

UNAUDITED COMPARATIVE PER COMMON SHARE DATA

     27  

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

     28  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     29  

RISK FACTORS

     31  

Risks Related to the Merger

     31  

Risks Relating to the Combined Company

     37  

 

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     Page  

CHEMICAL SPECIAL MEETING OF SHAREHOLDERS

     40  

Date, Time and Place

     40  

Purpose of Chemical Special Meeting

     40  

Recommendation of the Chemical Board of Directors

     40  

Chemical Record Date; Shareholders Entitled to Vote

     40  

Voting by Chemical’s Directors and Executive Officers

     41  

Quorum and Adjournment

     41  

Required Vote; Treatment of Abstentions and Failure to Vote

     41  

Voting on Proxies; Incomplete Proxies

     42  

Revocability of Proxies and Changes to a Chemical Shareholder’s Vote

     43  

Solicitation of Proxies

     43  

Attending the Chemical Special Meeting

     44  

CHEMICAL PROPOSALS

     45  

Chemical Proposal 1 – Approval of the Merger Agreement

     45  

Chemical Proposal 2 – Approval of the Amendment to Chemical’s Articles of Incorporation

     45  

Chemical Proposal 3 – Chemical Compensation Proposal

     46  

Chemical Proposal 4 – Chemical Adjournment Proposal

     47  

TCF SPECIAL MEETING OF SHAREHOLDERS

     48  

Date, Time and Place

     48  

Purpose of the TCF Special Meeting

     48  

Recommendation of the TCF Board of Directors

     48  

TCF Record Date and Quorum

     48  

TCF Voting Rights

     48  

Required Vote

     49  

Voting by TCF’s Directors and Executive Officers

     49  

Treatment of Abstentions; Failure to Vote

     49  

Voting on Proxies; Incomplete Proxies

     49  

Shares Held in Street Name

     50  

Revocability of Proxies and Changes to a TCF Shareholder’s Vote

     50  

Solicitation of Proxies

     51  

Attending the TCF Special Meeting

     51  

TCF PROPOSALS

     52  

TCF Proposal 1 – Adoption of the Merger Agreement

     52  

TCF Proposal 2 – TCF Compensation Proposal

     52  

TCF Proposal 3 – TCF Adjournment Proposal

     52  

THE PARTIES

     54  

THE MERGER

     56  

Terms of the Merger

     56  

 

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Conversion of Shares; Exchange and Payment Procedures

     57  

Background of the Merger

     58  

Recommendation of the Chemical Board of Directors and Reasons for the Merger

     66  

Recommendation of the TCF Board of Directors and Reasons for the Merger

     69  

Unaudited Financial Forecasts

     72  

Opinion of Chemical’s Financial Advisor

     76  

Opinion of TCF’s Financial Advisor

     86  

Interests of Chemical Directors and Executive Officers in the Merger

     94  

Merger-Related Compensation for Chemical’s Named Executive Officers

     98  

Interests of TCF Directors and Executive Officers in the Merger

     100  

Merger-Related Compensation for TCF’s Named Executive Officers

     103  

Board of Directors and Management Following the Merger

     105  

Dividends/Distributions

     106  

Litigation Relating to the Merger

     107  

REGULATORY APPROVALS REQUIRED FOR THE MERGER

     108  

ACCOUNTING TREATMENT

     111  

PUBLIC TRADING MARKETS

     112  

RESALE OF SHARES OF CHEMICAL COMMON STOCK AND PREFERRED STOCK

     112  

THE MERGER AGREEMENT

     113  

Structure of the Merger

     113  

Treatment of TCF Equity Awards

     114  

Closing and Effective Time of the Merger

     114  

Conversion of Shares and Exchange of Certificates

     114  

Representations and Warranties

     115  

Covenants and Agreements

     117  

Chemical Shareholder Meeting and TCF Shareholder Meeting and the Recommendations of Their Respective Boards of Directors

     123  

Agreement Not to Solicit Other Offers

     124  

Conditions to Complete the Merger

     125  

Termination; Termination Fee

     126  

Expenses and Fees

     129  

Amendment, Waiver and Extension of the Merger Agreement

     129  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     130  

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL INFORMATION

     133  

Note 1—Basis of Presentation

     136  

Note 2—Purchase Price Determination

     136  

Note 3—Preliminary Purchase Price Allocation

     137  

Note 4—Pro Forma Adjustments

     138  

 

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     Page  

Note 5—Merger Integration Costs

     140  

DESCRIPTION OF CHEMICAL CAPITAL STOCK

     141  

Authorized Capital

     141  

Common Stock

     141  

Preferred Stock

     141  

Certain Provisions of Chemical’s Organizational Documents and Applicable Law

     142  

Transfer Agent and Registrar

     144  

Listing

     144  

COMPARISON OF RIGHTS OF TCF SHAREHOLDERS AND CHEMICAL SHAREHOLDERS

     144  

General

     144  

Comparison of Rights of TCF Shareholders and Chemical Shareholders

     144  

NO APPRAISAL OR DISSENTER RIGHTS

     156  

EXPERTS

     157  

LEGAL OPINIONS

     158  

HOUSEHOLDING OF PROXY MATERIALS

     159  

OTHER MATTERS

     160  

CHEMICAL ANNUAL MEETING SHAREHOLDER PROPOSALS

     161  

TCF ANNUAL MEETING SHAREHOLDER PROPOSALS

     162  

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     163  

Annex A: Merger Agreement

     A-1  

Exhibit 1 – Form of Certificate of Designations of 5.70% Series C Non-Cumulative Perpetual Preferred Stock of the Combined Company

     A-63  

Exhibit 2 – Form of Amendment to Restated Articles of Incorporation of the Combined Company

     A-70  

Exhibit 3 – Form of Bylaws of the Combined Company

     A-73  

Annex B: Opinion of Keefe, Bruyette  & Woods, Inc., financial advisor to Chemical

     B-1  

Annex C: Opinion of J.P. Morgan Securities LLC, financial advisor to TCF

     C-1  

 

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QUESTIONS AND ANSWERS ABOUT THE MEETINGS

The following are answers to certain questions that you may have regarding the merger and the Chemical special meeting or TCF special meeting. We urge you to read carefully the remainder of this joint proxy statement/prospectus because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the annexes to, and the documents incorporated by reference in, this joint proxy statement/prospectus.

Q:    WHAT IS THE MERGER?

 

A:

Chemical and TCF have entered into an Agreement and Plan of Merger, dated as of January 27, 2019, which we refer to as the merger agreement. Under the merger agreement, Chemical and TCF have agreed to combine their respective companies in a merger of equals, pursuant to which TCF will merge with and into Chemical, with Chemical continuing as the surviving entity, in a transaction we refer to as the merger. Immediately following the merger or at such later time as the parties may mutually agree, Chemical Bank, Chemical’s wholly owned subsidiary, will merge with and into TCF Bank, TCF’s wholly owned subsidiary, with TCF Bank as the surviving bank, in a transaction we refer to as the bank merger. At the effective time of the merger, Chemical will change its name to “TCF Financial Corporation.”

Chemical will hold a special meeting of its shareholders, which we refer to as the Chemical special meeting, and TCF will hold a special meeting of its shareholders, which we refer to as the TCF special meeting, to obtain the required approvals, and you are being provided with this joint proxy statement/prospectus in connection with those meetings. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A. We urge you to read carefully this joint proxy statement/prospectus and the merger agreement in their entirety.

Q:    WHY AM I RECEIVING THIS DOCUMENT?

A:    In order to complete the merger, among other things:

 

   

Chemical shareholders must (1) approve the merger agreement, and (2) approve an amendment to Chemical’s articles of incorporation to (a) increase the number of authorized shares of Chemical common stock from 135 million to 220 million, and (b) change the name of Chemical to “TCF Financial Corporation,” effective only upon consummation of the merger.

 

   

TCF common shareholders must adopt the merger agreement.

Each of Chemical and TCF is sending this joint proxy statement/prospectus to its shareholders to help them decide how to vote their shares of common stock with respect to such matters to be considered at their respective meetings of shareholders.

Information about these meetings, the merger and the other business to be considered by Chemical shareholders at its special meeting or by TCF shareholders at its special meeting, as applicable, is contained in this joint proxy statement/prospectus and you should read it carefully.

This document constitutes both a joint proxy statement of Chemical and TCF and a prospectus of Chemical. It is a joint proxy statement because each of the boards of directors of Chemical and TCF is soliciting proxies from their shareholders using this document. It is a prospectus because Chemical, in connection with the merger, will issue shares of Chemical common stock to TCF common shareholders and shares of a newly created series of Chemical preferred stock to be designated as 5.70% Series C Non-Cumulative Perpetual Preferred Stock, which we refer to as Chemical Series C preferred stock, and related depositary shares each representing a 1/1000th interest in a share of Chemical Series C preferred stock, in exchange for the outstanding shares of TCF 5.70% Series C Non-Cumulative Perpetual Preferred Stock, which we refer to as TCF Series C preferred stock, and related depositary shares each representing a 1/1000th interest in a share of TCF Series C preferred stock, and this joint proxy statement/prospectus contains information about that common stock and Series C preferred stock.

 

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Q:    WHAT WILL TCF COMMON SHAREHOLDERS RECEIVE IN THE MERGER?

 

A:

If the merger is completed, each outstanding share of TCF common stock, except for treasury stock or shares owned by TCF or Chemical, in each case, other than in a fiduciary or agency capacity or as a result of debts previously contracted (which will be cancelled), will be automatically converted into the right to receive 0.5081 shares, which ratio we refer to as the exchange ratio, of Chemical common stock. Chemical will not issue any fractional shares of Chemical common stock in the merger. Instead, a TCF shareholder who otherwise would have received a fraction of a share of Chemical common stock will receive an amount in cash (rounded to the nearest cent) determined by multiplying (i) the average of the closing sale prices of Chemical common stock for the five full trading days ending on the day before the effective time of the merger by (ii) the fraction of a share (rounded to the nearest thousandth when expressed in decimal form) of Chemical common stock to which such shareholder would otherwise be entitled to receive.

Q:    WHAT WILL TCF SERIES C PREFERRED SHAREHOLDERS RECEIVE IN THE MERGER?

 

A:

If the merger is completed, each share of TCF Series C preferred stock and related depositary shares, each representing a 1/1,000th interest in a share of TCF Series C preferred stock will be converted into the right to receive, without interest, one share of Chemical Series C preferred stock, and the related depositary shares. The Chemical Series C preferred stock will have equivalent rights and preferences as the TCF Series C preferred stock.

 

Q:

WILL THE VALUE OF THE MERGER CONSIDERATION TO TCF COMMON SHAREHOLDERS CHANGE BETWEEN THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS AND THE TIME THE MERGER IS COMPLETED?

 

A:

Yes. Although the exchange ratio is fixed, the value of the merger consideration is dependent upon the value of Chemical’s common stock and therefore will fluctuate with the market price of Chemical’s common stock. Accordingly, any change in the market price of Chemical’s common stock prior to the merger will affect the market value of the merger consideration that TCF’s shareholders will receive as a result of the merger.

Q:    WHAT WILL HAPPEN TO SHARES OF CHEMICAL COMMON STOCK IN THE MERGER?

 

A:

Nothing. Each share of Chemical common stock outstanding will remain outstanding as a share of Chemical common stock following the effective time of the merger.

Q:    WHAT AM I BEING ASKED TO VOTE ON?

 

A:

Chemical Special Meeting: Chemical shareholders are being asked to consider and vote on the following proposals:

 

   

a proposal to approve the merger agreement, which we refer to as the Chemical merger proposal;

 

   

a proposal to approve an amendment to Chemical’s articles of incorporation to (a) increase the number of authorized shares of Chemical common stock from 135 million to 220 million, and (b) change the name of Chemical to “TCF Financial Corporation,” effective only upon consummation of the merger, which we refer to as the Chemical articles amendment proposal;

 

   

a proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to the named executive officers of Chemical that is based on or otherwise relates to the merger, which we refer to as the Chemical compensation proposal; and

 

   

a proposal to approve the adjournment of the Chemical special meeting, if necessary or appropriate, to permit further solicitation of proxies in favor of the Chemical merger proposal or the Chemical articles amendment proposal, which we refer to as the Chemical adjournment proposal.

 

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TCF Special Meeting: TCF shareholders are being asked to consider and vote on the following proposals:

 

   

a proposal to adopt the merger agreement, which we refer to as the TCF merger proposal;

 

   

a proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to the named executive officers of TCF that is based on or otherwise relates to the merger, which we refer to as the TCF compensation proposal; and

 

   

a proposal to approve the adjournment of the TCF special meeting, if necessary or appropriate, to permit further solicitation of proxies in favor of the TCF merger proposal, which we refer to as the TCF adjournment proposal.

 

Q:

WHEN AND WHERE ARE THE CHEMICAL SPECIAL MEETING AND TCF SPECIAL MEETING?

 

A:

Chemical Special Meeting: The Chemical special meeting will be held on June 7, 2019, at 10:00 a.m. local time, at the Somerset Inn, 2601 West Big Beaver Road, Troy, Michigan 48084.

TCF Special Meeting: The TCF special meeting will be held on June 7, 2019, at 9:00 a.m. local time, at the TCF Minnetonka office, 11100 Wayzata Boulevard, Minnetonka, Minnesota 55305.

Q:    WHO IS ENTITLED TO VOTE AT EACH MEETING?

 

A:

Chemical Special Meeting: All holders of Chemical common stock who held shares at the close of business on May 1, 2019, which we refer to as the Chemical record date, are entitled to receive notice of and to vote at the Chemical special meeting, provided that such shares of Chemical common stock remain outstanding on the date of the Chemical special meeting.

TCF Special Meeting: All holders of TCF common stock who held shares at the close of business on April 30, 2019, which we refer to as the TCF record date, are entitled to receive notice of and to vote at the TCF special meeting, provided that such shares of TCF common stock remain outstanding on the date of the TCF special meeting.

 

Q:

WILL HOLDERS OF TCF SERIES C PREFERRED STOCK BE ENTITLED TO VOTE ON THE MERGER AT THE TCF SPECIAL MEETING?

 

A:

No. The TCF Series C preferred stock (or related depositary shares) does not have voting rights with respect to any of the proposals that will be considered at the TCF special meeting. Holders of TCF preferred stock (or related depositary shares) will not be entitled to vote at the TCF special meeting, and should not submit a proxy card with respect to the TCF special meeting or otherwise attempt to vote with respect to their TCF Series C preferred stock (or related depositary shares).

Q:    WHAT CONSTITUTES A QUORUM AT EACH MEETING?

 

A:

Chemical Special Meeting: The presence, in person or represented by proxy, of at least a majority of the total number of outstanding shares of Chemical common stock entitled to vote is necessary in order to constitute a quorum for purposes of the matters being voted on at the Chemical special meeting.

Abstentions will be included in determining the number of shares present at the Chemical special meeting for the purpose of determining the presence of a quorum, but broker non-votes will not be counted for the purposes of determining whether a quorum exists.

TCF Special Meeting: The presence, in person or represented by proxy, of at least a majority of the total number of outstanding shares of TCF common stock entitled to vote is necessary in order to constitute a quorum for purposes of the matters being voted on at the TCF special meeting.

 

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Abstentions will be included in determining the number of shares present at the TCF special meeting for the purpose of determining the presence of a quorum, but broker non-votes will not be counted for the purposes of determining whether a quorum exists.

 

Q:

WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL AT THE CHEMICAL SPECIAL MEETING?

 

A:

Chemical merger proposal:

 

   

Standard: Approval of the Chemical merger proposal requires the affirmative vote of a majority of the issued and outstanding shares of Chemical common stock entitled to vote. Chemical shareholders must approve the Chemical merger proposal in order for the merger to occur. If Chemical shareholders fail to approve the Chemical merger proposal, the merger will not occur.

 

   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy card or fail to instruct your bank or broker how to vote with respect to the Chemical merger proposal, it will have the same effect as a vote “AGAINST” the proposal.

Chemical articles amendment proposal:

 

   

Standard: Approval of the Chemical articles amendment proposal requires the affirmative vote of a majority of the issued and outstanding shares of Chemical common stock entitled to vote. Chemical shareholders must approve the Chemical articles amendment proposal in order for the merger to occur. If Chemical shareholders fail to approve the Chemical articles amendment proposal, the merger will not occur.

 

   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy card or fail to instruct your bank or broker how to vote with respect to the Chemical articles amendment proposal, it will have the same effect as a vote “AGAINST” the proposal.

Chemical compensation proposal:

 

   

Standard: Assuming a quorum is present, approval of the Chemical compensation proposal requires the affirmative vote of a majority of the votes cast at the Chemical special meeting. This is an advisory vote, and therefore is not binding on Chemical or the Chemical board of directors or the Chemical compensation committee. If Chemical shareholders fail to approve the Chemical compensation proposal, but approve the merger proposal and the Chemical articles amendment proposal, the merger may nonetheless occur.

 

   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy card or fail to instruct your bank or broker how to vote with respect to the Chemical compensation proposal, you will be deemed not to have cast a vote with respect to the proposal and it will have no effect on the proposal.

Chemical adjournment proposal:

 

   

Standard: Assuming a quorum is present, approval of the Chemical adjournment proposal requires the affirmative vote of a majority of the votes cast at the Chemical special meeting. If Chemical shareholders fail to approve the Chemical adjournment proposal, but approve the merger proposal and the Chemical articles amendment proposal, the merger may nonetheless occur.

 

   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy card or fail to instruct your bank or broker how to vote with respect to the Chemical adjournment proposal, you will be deemed not to have cast a vote with respect to the proposal and it will have no effect on the proposal.

 

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Q:

WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL AT THE TCF SPECIAL MEETING?

 

A:

TCF merger proposal:

 

   

Standard: Approval of the TCF merger proposal requires the affirmative vote of a majority of the issued and outstanding shares of TCF common stock. TCF shareholders must approve the TCF merger proposal in order for the merger to occur. If TCF shareholders fail to approve the TCF merger proposal, the merger will not occur.

 

   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy card or fail to instruct your bank or broker how to vote with respect to the TCF merger proposal, it will have the same effect as a vote “AGAINST” the proposal.

TCF compensation proposal:

 

   

Standard: Assuming a quorum is present, approval of the TCF compensation proposal requires the affirmative vote of a majority of shares of TCF common stock represented at the TCF special meeting, in person or by proxy, that are entitled to vote. This is an advisory vote, and therefore is not binding on TCF, Chemical or the boards of directors or the compensation committees of TCF or Chemical. If TCF shareholders fail to approve the TCF compensation proposal, but approve the TCF merger proposal, the merger may nonetheless occur.

 

   

Effect of abstentions and broker non-votes: Because shares voted “ABSTAIN” are counted as present for purposes of determining a quorum, if you mark “ABSTAIN” on your proxy card, your abstention will have the same effect as a vote “AGAINST” the TCF compensation proposal. If you fail to vote or fail to instruct your bank or broker how to vote with respect to the TCF compensation proposal, you will be deemed not to be present with respect to the proposal, and it will have no effect on the proposal.

TCF adjournment proposal:

 

   

Standard: Assuming a quorum is present, approval of the TCF adjournment proposal requires the affirmative vote of a majority of shares of TCF common stock represented at the TCF special meeting, in person or by proxy, that are entitled to vote. If TCF shareholders fail to approve the TCF adjournment proposal, but approve the TCF merger proposal, the merger may nonetheless occur.

 

   

Effect of abstentions and broker non-votes: Because shares voted “ABSTAIN” are counted as present for purposes of determining a quorum, if you mark “ABSTAIN” on your proxy card, it will have the same effect as a vote “AGAINST” the TCF adjournment proposal. If you fail to vote or fail to instruct your bank or broker how to vote with respect to the TCF adjournment proposal, you will be deemed not to be present with respect to the proposal, and it will have no effect on the proposal.

Q:    WHAT ARE THE CONDITIONS TO COMPLETE THE MERGER?

 

A:

The obligations of Chemical and TCF to complete the merger are subject to the satisfaction or waiver of certain closing conditions contained in the merger agreement, including the receipt of required regulatory approvals and the expiration of all statutory waiting periods without the imposition of any materially burdensome regulatory condition, tax opinions, approval by Chemical shareholders of both the Chemical merger proposal and the Chemical articles amendment proposal and approval by TCF shareholders of the TCF merger proposal. For more information, see “The Merger Agreement—Conditions to Complete the Merger” beginning on page 125.

 

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Q:

WHEN WILL THE MERGER BE COMPLETED?

 

A:

We will complete the merger when all of the conditions to completion contained in the merger agreement are satisfied or waived, including the receipt of required regulatory approvals and the expiration of all statutory waiting periods and approval by Chemical shareholders of both the Chemical merger proposal and the Chemical articles amendment proposal and approval by TCF shareholders of the TCF merger proposal. While we expect the merger to be completed in the late third or early fourth quarter of 2019, because fulfillment of some of the conditions to completion of the merger are not entirely within our control, we cannot assure you of the actual timing.

 

Q:

HOW DOES THE CHEMICAL BOARD OF DIRECTORS AND THE TCF BOARD OF DIRECTORS RECOMMEND THAT I VOTE?

 

A:

The Chemical board of directors has unanimously adopted the merger agreement and approved the transactions contemplated thereby, including the issuance of Chemical common stock and Chemical Series C preferred stock (or related depositary shares) and the amendment to the Chemical articles of incorporation, and recommends that Chemical shareholders vote “FOR” the Chemical merger proposal, “FOR” the Chemical articles amendment proposal, “FOR” the Chemical compensation proposal and “FOR” the Chemical adjournment proposal.

The TCF board of directors unanimously approved the merger agreement and the transactions contemplated thereby and recommends that the TCF shareholders vote “FOR” the TCF merger proposal, “FOR” the TCF compensation proposal and “FOR” the TCF adjournment proposal.

Q:    WHAT DO I NEED TO DO NOW?

 

A:

After carefully reading and considering the information contained in or incorporated by reference into this joint proxy statement/prospectus, including its annexes, please vote your shares as soon as possible so that your shares will be represented at your respective company’s meeting of shareholders. Please follow the instructions set forth herein or on the enclosed proxy card or on the voting instruction form provided by your broker, bank or other nominee if your shares are held in the name of your broker, bank or other nominee.

 

Q:

HOW DO I VOTE?

 

A:

If you are a shareholder of record of Chemical as of May 1, 2019, the Chemical record date, you may submit your proxy before the Chemical special meeting in any of the following ways:

 

   

by mail, by completing, signing, dating and returning the enclosed proxy card to Chemical using the enclosed postage-paid envelope;

 

   

by telephone, by calling toll-free 1-866-895-6904 and following the recorded instructions; or

 

   

via the Internet, by accessing the website www.proxypush.com/CHFC and following the instructions on the website.

If you are a shareholder of record of TCF as of April 30, 2019, the TCF record date, you may submit your proxy before the TCF special meeting in any of the following ways:

 

   

by mail, by completing, signing, dating and returning the enclosed proxy card to TCF using the enclosed postage-paid envelope;

 

   

by telephone, by calling toll-free 1-800-690-6903 and following the recorded instructions; or

 

   

via the Internet, by accessing the website www.proxyvote.com and following the instructions on the website.

 

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If you intend to submit your proxy by telephone or via the Internet, you must do so by 11:59 P.M. Eastern Time on the day before your respective company’s meeting of shareholders. If you intend to submit your proxy by mail, your completed proxy card must be received prior to your respective company’s meeting of shareholders.

If you are a Chemical shareholder as of the Chemical record date or TCF shareholder as of the TCF record date, you may also cast your vote in person at your respective company’s meeting of shareholders. If you plan to attend your respective company’s meeting of shareholders, you must hold your shares in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted to the meeting. Each of Chemical and TCF reserves the right to refuse admittance to anyone without proper proof of stock ownership or without proper photo identification. Whether or not you intend to be present at your respective company’s meeting of shareholders, you are urged to complete, sign, date and return the enclosed proxy card to Chemical or TCF, as applicable, in the enclosed postage-paid envelope or submit a proxy by telephone or via the Internet as described on the enclosed instructions as soon as possible. If you are then present and wish to vote your shares in person, your original proxy may be revoked by attending and voting at your respective company’s meeting of shareholders.

If you hold your shares in “street name” through a broker, bank or other nominee, your broker, bank or other nominee will send you separate instructions describing the procedure for voting your shares. If your shares are held in “street name,” you must obtain a legal proxy, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee, to vote your shares in person at your respective company’s meeting of shareholders.

 

Q:

IF MY SHARES ARE HELD IN “STREET NAME” BY A BROKER, BANK OR OTHER NOMINEE, WILL MY BROKER, BANK OR OTHER NOMINEE VOTE MY SHARES FOR ME?

 

A:

No. Under the rules of the NYSE, brokers who hold shares in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion only on “routine” proposals when they have not received instructions from beneficial owners. However, brokers are not permitted to exercise their voting discretion with respect to the approval of matters that the NYSE determines to be “non-routine” without specific instructions from the beneficial owner. Under the NYSE rules, all of the proposals to be voted on at the Chemical special meeting and the TCF special meeting are considered “non-routine” matters. Because none of the proposals to be voted on at the Chemical special meeting and TCF special meeting are “routine” matters for which brokers may have discretionary authority to vote, neither Chemical nor TCF expects any broker non-votes at the Chemical special meeting or the TCF special meeting. As a result, if you hold your shares of Chemical common stock or TCF common stock in “street name,” your shares will not be represented and will not be voted on any matter unless you affirmatively instruct your bank, broker or other nominee how to vote your shares in one of the ways indicated by your bank, broker or other nominee. It is therefore critical that you cast your vote by instructing your bank, broker or other nominee on how to vote.

Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card directly to Chemical or TCF or by voting in person at your respective company’s meeting of shareholders, unless you provide a legal proxy, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee. In addition to such legal proxy, if you plan to attend your respective company’s meeting of shareholders, but you are not a shareholder of record because you hold your shares in “street name,” please bring evidence of your beneficial ownership of your shares (e.g., a copy of a recent brokerage statement showing the shares) and valid photo identification with you to such company’s meeting of shareholders.

 

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Q:

WHAT WILL HAPPEN IF I RETURN MY PROXY CARD WITHOUT INDICATING HOW TO VOTE?

 

A:

If you sign and return your proxy card without indicating how to vote on any particular proposal, the shares of Chemical common stock represented by your proxy will be voted as recommended by the Chemical board of directors with respect to such proposal or the shares of TCF common stock represented by your proxy will be voted as recommended by the TCF board of directors with respect to such proposal, as the case may be.

 

Q:

MAY I CHANGE MY VOTE AFTER I HAVE SUBMITTED MY PROXY OR VOTING INSTRUCTION CARD?

 

A:

Yes. If you are the record holder of either Chemical or TCF common stock, you can change your vote or revoke your proxy at any time before your proxy is voted at the applicable meeting. You can do this by:

 

   

timely delivering a signed written notice of revocation to the Corporate Secretary of Chemical or TCF, as applicable;

 

   

timely delivering a new, valid proxy bearing a later date; or

 

   

attending the special meeting and voting in person. Simply attending the Chemical special meeting or the TCF special meeting without voting will not revoke any proxy that you have previously given or change your vote.

If you hold shares of either Chemical or TCF common stock in “street name,” you must contact your broker, bank or other nominee to change your vote.

Q:    ARE TCF SHAREHOLDERS ENTITLED TO APPRAISAL RIGHTS?

 

A:

No, under Section 262 of the Delaware General Corporation Law, or the DGCL, which is the law under which TCF is incorporated, the holders of TCF common stock and TCF Series C preferred stock and related depositary shares will not be entitled to any appraisal rights or dissenters’ rights in connection with the merger.

 

Q:

ARE CHEMICAL SHAREHOLDERS ENTITLED TO APPRAISAL RIGHTS?

 

A:

No, under Section 450.1762 of the Michigan Business Corporation Act, or the MBCA, which is the law under which Chemical is incorporated, the holders of Chemical common stock will not be entitled to any appraisal rights or dissenters’ rights in connection with the merger.

 

Q:

WHAT ARE THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO U.S. TCF SHAREHOLDERS?

 

A:

The merger is intended to qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, and it is a condition to the respective obligations of Chemical and TCF to complete the merger that each receives a legal opinion to that effect. Therefore, for U.S. federal income tax purposes, as a result of the merger, a U.S. holder of shares of TCF common stock generally will not recognize gain or loss on the receipt of Chemical common stock in the merger, but will recognize gain or loss with respect to any cash received in lieu of fractional shares of Chemical common stock. A holder of TCF Series C preferred stock or related depositary shares that exchanges its TCF Series C preferred stock for Chemical Series C preferred stock or related depositary shares generally will not recognize gain or loss on the receipt of Chemical Series C preferred stock. For more information, see “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 130.

 

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The consequences of the merger to any particular shareholder will depend on that shareholder’s particular facts and circumstances. Accordingly, you are urged to consult your tax advisor to determine your tax consequences from the merger.

Q:    WHAT HAPPENS IF THE MERGER IS NOT COMPLETED?

 

A:

If the merger is not completed, TCF’s common shareholders will not receive any consideration for their shares of TCF common stock in connection with the merger, and TCF preferred shareholders or holders of related depositary shares will not receive Chemical Series C preferred stock or related depositary shares in connection with the merger. Instead, TCF will remain an independent public company and both TCF common stock and depositary shares representing 1/1000th interest in a share of TCF Series C preferred stock will continue to be listed and traded on the NYSE. In addition, if the merger agreement is terminated in certain circumstances, Chemical or TCF may be required to pay the other party a fee with respect to such termination of the merger agreement. See “The Merger Agreement—Termination; Termination Fee” beginning on page 126.

 

Q:

WHAT HAPPENS IF I SELL MY SHARES AFTER THE APPLICABLE RECORD DATE BUT BEFORE MY COMPANY’S MEETING OF SHAREHOLDERS?

 

A:

Each of the Chemical record date and TCF record date is earlier than the date of the Chemical special meeting or TCF special meeting, as applicable, and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of Chemical common stock or TCF common stock, as applicable, after the applicable record date but before the date of the applicable shareholder meeting, you will retain your right to vote at such meeting (provided that such shares remain outstanding on the date of such meeting), but, with respect to TCF common stock, you will not have the right to receive the merger consideration to be received by TCF shareholders in connection with the merger. In order to receive the merger consideration, you must hold your shares of TCF common stock through completion of the merger.

 

Q:

WHAT DO I DO IF I RECEIVE MORE THAN ONE JOINT PROXY STATEMENT/PROSPECTUS OR SET OF VOTING INSTRUCTIONS?

 

A:

Chemical shareholders and TCF shareholders may receive more than one set of voting materials, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction forms. For example, if you hold shares of Chemical or TCF common stock in more than one brokerage account, you will receive a separate voting instruction form for each brokerage account in which you hold such shares. If you hold shares directly as a record holder and also in “street name” or otherwise through a nominee, you will receive more than one joint proxy statement/prospectus and/or set of voting instructions relating to the applicable shareholder meeting. These should each be voted and/or returned separately in order to ensure that all of your shares are voted.

Q:    SHOULD TCF SHAREHOLDERS SEND IN THEIR STOCK CERTIFICATES NOW?

 

A:

No. TCF common and preferred shareholders SHOULD NOT send in any stock certificates now. After the merger is complete, you will receive separate written instructions for surrendering your shares of TCF common stock in exchange for the merger consideration or TCF Series C preferred stock in exchange for Chemical Series C preferred stock, as applicable. In the meantime, you should retain your stock certificates because they are still valid. Please do not send in your stock certificates with your proxy card.

Q:    WILL A PROXY SOLICITOR BE USED?

 

A:

Yes. Chemical has engaged D.F. King & Co., Inc., which we refer to as D.F. King, to assist in the solicitation of proxies for the Chemical special meeting, and estimates it will pay D.F. King a fee of approximately $13,500 plus certain expenses. Chemical has also agreed to indemnify D.F. King against certain losses. TCF

 

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  has engaged Georgeson LLC, which we refer to as Georgeson, to assist in the solicitation of proxies for the TCF special meeting, and estimates it will pay Georgeson a fee of approximately $12,500 plus certain expenses. TCF has also agreed to indemnify Georgeson against certain losses. In addition, Chemical, TCF and their respective officers and employees may also solicit proxies by mail, telephone, facsimile, electronic mail or in person, but no additional compensation will be paid to them.

Q:    WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANIES?

 

A:

You can find more information about Chemical and TCF from the various sources described under “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus and “Incorporation of Certain Documents by Reference” beginning on page 163.

 

Q:

WHAT IS HOUSEHOLDING AND HOW DOES IT AFFECT ME?

 

A:

The SEC permits companies to send a single set of proxy materials to any household at which two or more shareholders reside, unless contrary instructions have been received, but only if the applicable shareholders provide advance notice and follow certain procedures. In such cases, each shareholder continues to receive a separate notice of the meeting and proxy card. Certain brokerage firms may have instituted householding for beneficial owners of Chemical common stock or TCF common stock, as applicable, held through brokerage firms. If your family has multiple accounts holding Chemical common stock or TCF common stock, as applicable, you may have already received a householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of this joint proxy statement/prospectus. The broker will arrange for delivery of a separate copy of this joint proxy statement/prospectus promptly upon your written or oral request. You may decide at any time to revoke your decision to household, and thereby receive multiple copies.

 

Q:

WHOM SHOULD I CONTACT IF I HAVE ANY QUESTIONS?

 

A:

You may contact Chemical or TCF at the telephone numbers listed under “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus and “Incorporation of Certain Documents by Reference” beginning on page 163. If you have any questions about the proxy materials or if you need assistance submitting your proxy or voting your shares or need additional copies of this joint proxy statement/prospectus or the enclosed proxy card, you should contact the proxy solicitation agent for the company in which you hold shares. If you are a Chemical shareholder, you should contact D.F. King, the proxy solicitation agent for Chemical, by calling (212) 269-5550, or toll-free at (800) 309-2984. If you are a TCF shareholder, you should contact Georgeson, the proxy solicitation agent for TCF, toll-free at (800) 676-0098.

 

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SUMMARY

This summary highlights selected information included in this joint proxy statement/prospectus and does not contain all of the information that may be important to you. You should read this entire document and its annexes and the other documents to which we refer before you decide how to vote. In addition, we incorporate by reference important business and financial information about Chemical and TCF into this joint proxy statement/prospectus. See “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus and “Incorporation of Certain Documents by Reference” beginning on page 163. Each item in this summary includes a page reference directing you to a more complete description of that item.

The Merger (page 56)

Chemical and TCF have entered into the merger agreement, pursuant to which TCF will merge with and into Chemical, with Chemical continuing as the surviving corporation, in a transaction we refer to as the merger. The terms and conditions of the merger are contained in the merger agreement, which is attached as Annex A to this joint proxy statement/prospectus. We encourage you to read the merger agreement carefully, as it is the legal document that governs the merger. Immediately following the merger or at such later time as the parties may mutually agree, Chemical Bank will merge with and into TCF Bank, with TCF Bank as the surviving bank.

Merger Consideration (page 56)

Each outstanding share of TCF common stock, except for shares of TCF common stock owned by TCF as treasury stock or shares of TCF common stock owned by TCF or Chemical, in each case, other than in a fiduciary or agency capacity or as a result of debts previously contracted (which will be cancelled), will be automatically converted into the right to receive the merger consideration of 0.5081 shares of Chemical common stock.

Based on the closing trading price of Chemical common stock on NASDAQ on January 25, 2019, the last trading day before public announcement of the merger, of $42.47, the value of the per share merger consideration payable to holders of TCF common stock would be $21.58. Based on the closing trading price of Chemical common stock on NASDAQ on May 1, 2019, the last practicable trading date before the date of this joint proxy statement/prospectus, of $43.26, the value of the per share merger consideration payable to holders of TCF common stock would be $21.98. The value of the merger consideration that TCF shareholders will receive for each share of TCF common stock will depend on the price per share of Chemical common stock at the time the TCF shareholders receive the shares of Chemical common stock. Therefore, the value of the merger consideration may be different than its estimated value based on the current price of Chemical common stock, the price of Chemical common stock at the time of the Chemical special meeting or the TCF special meeting and the price of Chemical common stock on the date the merger is completed.

Treatment of TCF Preferred Stock (page 56)

Each share of TCF’s outstanding 5.70% Series C Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, will be converted into the right to receive, without interest, one share of Chemical’s 5.70% Series C Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, with equivalent rights and preferences.

Treatment of TCF Equity Awards (page 56)

At the effective time of the merger, each equity award granted under TCF’s equity plans, which we refer to as a TCF equity award, that is outstanding immediately prior to the effective time will be adjusted so that



 

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its holder will be entitled to receive a number of shares of Chemical common stock (i) equal to the product of (a) the number of shares of TCF common stock subject to such TCF equity award immediately prior to the effective time multiplied by (b) the exchange ratio and (ii) rounded, as applicable, to the nearest whole share, and shall otherwise remain subject to the same terms and conditions (including, without limitation, with respect to vesting conditions (taking into account any vesting upon the occurrence of the effective time that is applicable to the TCF equity awards granted to TCF’s non-employee directors) and cash dividend equivalent rights). All TCF equity awards held by an employee whose employment will continue with the combined company or its subsidiaries after the merger will vest in their entirety to the extent such employee’s employment is terminated by the combined company without cause or by the employee for good reason prior to the second anniversary of the effective time of the merger. For any TCF equity awards that are subject to performance-based vesting, the number of shares of TCF common stock underlying such award will be calculated and fixed as of the effective time of the merger assuming achievement of the applicable performance conditions at the greater of the target level performance and the actual level of achievement of such conditions based on TCF’s performance results through the latest practicable date prior to the effective time of the merger, and such awards will convert into service-based vesting awards with the applicable vesting date to be the last day of the original performance period. For purposes of TCF equity awards for which performance is achievable at a single level, the performance condition will be no longer relevant as of the effective time of the merger.

For more information, see “The Merger—Terms of the Merger—Treatment of TCF Equity Awards” beginning on page 56.

Recommendation of the Chemical Board of Directors (page 66 )

The Chemical board of directors has unanimously (i) adopted the merger agreement and determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of Chemical and its shareholders and (ii) approved the execution and delivery of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, the issuance of Chemical common stock and preferred stock (or related depositary shares) and the amendment to the Chemical articles of incorporation. The Chemical board of directors unanimously recommends that Chemical shareholders vote “FOR” the Chemical merger proposal, “FOR” the Chemical articles amendment proposal, “FOR” the Chemical compensation proposal and “FOR” the Chemical adjournment proposal. See “The Merger—Recommendation of the Chemical Board of Directors and Reasons for the Merger” beginning on page 66.

Recommendation of the TCF Board of Directors (page 69)

The TCF board of directors has unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of TCF and its shareholders and declared that the merger agreement is advisable and (ii) approved the execution of the merger agreement and the consummation of the transactions contemplated thereby, including the merger. The TCF board of directors unanimously recommends that the TCF shareholders vote “FOR” the TCF merger proposal, “FOR” the TCF compensation proposal and “FOR” the TCF adjournment proposal. See “The Merger—Recommendation of the TCF Board of Directors and Reasons for the Merger” beginning on page 69.

Opinion of Chemical’s Financial Advisor (page 76)

In connection with the merger, Chemical’s financial advisor, Keefe, Bruyette & Woods, Inc., which we refer to as KBW, delivered a written opinion, dated January 27, 2019, to the Chemical board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to Chemical of the exchange ratio in the proposed merger. The full text of the opinion, which describes the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by KBW in preparing the opinion,



 

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is attached as Annex B to this joint proxy statement/ prospectus. The summary of the KBW opinion set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. Chemical’s shareholders are urged to read the opinion in its entirety. The opinion was for the information of, and was directed to, the Chemical board of directors (in its capacity as such) in connection with its consideration of the financial terms of the merger. The opinion did not address the underlying business decision of Chemical to engage in the merger or enter into the merger agreement or constitute a recommendation to the Chemical board of directors in connection with the merger, and it does not constitute a recommendation to any holder of Chemical common stock or any shareholder of any other entity as to how to vote in connection with the merger or any other matter.

For more information, see the section entitled “The Merger—Opinion of Chemical’s Financial Advisor” beginning on page 76 of this joint proxy statement/prospectus and the copy of the KBW opinion included in this joint proxy statement/prospectus as Annex B.

Opinion of TCF’s Financial Advisor (page 86)

At the meeting of the TCF board of directors on January 27, 2019, TCF’s financial advisor, J.P. Morgan Securities LLC, which we refer to as J.P. Morgan, rendered its oral opinion to the TCF board of directors, subsequently confirmed in writing, that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to the holders of TCF’s common stock.

The J.P. Morgan written opinion, dated January 27, 2019, is sometimes referred to herein as the J.P. Morgan opinion. The full text of the J.P. Morgan opinion, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex C to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of the J.P. Morgan opinion set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. TCF’s shareholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the TCF board of directors (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed merger, was directed only to the exchange ratio in the merger and did not address any other aspect of the merger. J.P. Morgan expressed no opinion as to the fairness of the exchange ratio to the holders of any class of securities, creditors or other constituencies of TCF or as to the underlying decision by TCF to engage in the proposed merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any shareholder of TCF as to how such shareholder should vote with respect to the proposed merger or any other matter.

For more information, see the section entitled “The Merger—Opinion of TCF’s Financial Advisor” beginning on page 86 of this joint proxy statement/prospectus and the copy of the J.P. Morgan opinion included in this joint proxy statement/prospectus as Annex C.

Chemical Special Meeting of Shareholders (page 40)

The special meeting of Chemical shareholders will be held on June 7, 2019, at 10:00 a.m. local time, at the Somerset Inn, 2601 West Big Beaver Road, Troy, Michigan 48084. At the Chemical special meeting, Chemical shareholders will be asked to approve the Chemical merger proposal, the Chemical articles amendment proposal, the Chemical compensation proposal and the Chemical adjournment proposal.

The Chemical board of directors has fixed the close of business on May 1, 2019 as the record date for determining the holders of Chemical common stock entitled to receive notice of, and to vote at, the Chemical special meeting. As of the Chemical record date, there were 71,551,637 shares of Chemical common stock outstanding and entitled to vote at the Chemical special meeting held by 4,702 holders of record.



 

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The presence, in person or represented by proxy, of at least a majority of the total number of outstanding shares of Chemical common stock entitled to vote is necessary in order to constitute a quorum for purposes of the matters being voted on at the Chemical special meeting.

Each share of Chemical common stock entitles the holder thereof to one vote on each proposal to be considered at the Chemical special meeting. As of the record date, directors and executive officers of Chemical and their affiliates owned and were entitled to vote 559,594 shares of Chemical common stock, representing approximately 0.78% of the shares of Chemical common stock issued and outstanding on that date. Chemical currently expects that its directors and executive officers will vote their shares in favor of the Chemical merger proposal, the Chemical articles amendment proposal, the Chemical compensation proposal and the Chemical adjournment proposal, although none of them has entered into any agreements obligating them to do so. As of the record date, TCF did not beneficially hold any shares of Chemical common stock.

TCF Special Meeting of Shareholders (page 48)

The special meeting of TCF shareholders will be held on June 7, 2019, at 9:00 a.m. local time, at the TCF Minnetonka office, 11100 Wayzata Boulevard, Minnetonka, Minnesota 55305. At the TCF special meeting, TCF shareholders will be asked to approve the TCF merger proposal, the TCF compensation proposal and the TCF adjournment proposal.

The TCF board of directors has fixed the close of business on April 30, 2019 as the record date for determining the holders of TCF common stock entitled to receive notice of, and to vote at, the TCF special meeting. As of the TCF record date, there were 164,186,454 shares of TCF common stock outstanding and entitled to vote at the TCF special meeting held by 5,072 holders of record.

The presence, in person or represented by proxy, of at least a majority of the total number of outstanding shares of TCF common stock entitled to vote is necessary in order to constitute a quorum for purposes of the matters being voted on at the TCF special meeting.

Each share of TCF common stock entitles the holder thereof to one vote on each proposal to be considered at the TCF special meeting. As of the TCF record date, directors and executive officers of TCF and their affiliates owned and were entitled to vote 3,786,390 shares of TCF common stock, representing approximately 2.3% of the shares of TCF common stock issued and outstanding on that date. TCF currently expects that its directors and executive officers will vote their shares in favor of the TCF merger proposal, the TCF compensation proposal and the TCF adjournment proposal, although none of them has entered into any agreements obligating them to do so. As of the record date, Chemical did not beneficially hold any shares of TCF common stock.

Interests of Chemical Directors and Executive Officers in the Merger (page 94)

In considering the recommendation of the Chemical board of directors with respect to the merger, Chemical shareholders should be aware that certain of Chemical’s directors and executive officers have interests in the merger, including financial interests, that may be different from, or in addition to, the interests of the other shareholders of Chemical generally. The Chemical board of directors was aware of and considered these interests during its deliberations of the merits of the merger and in determining to recommend to Chemical shareholders that they vote for the Chemical merger proposal and thereby approve the transactions contemplated by the merger agreement, including the merger.

These interests include, among others:

 

   

In connection with the merger, performance-based restricted stock units held by Chemical executive officers for which performance results have not been measured will be measured as of



 

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the latest practicable date before the closing of the merger and the number of performance-based restricted stock units will be fixed at the greater of the target (100%) performance level or actual performance and such awards will continue to vest based on the executive’s continued service through the end of the applicable performance period;

 

   

If a Chemical executive officer experiences a qualifying termination without cause by Chemical, or if the executive terminates his or her employment for good reason following the merger, such executive’s unvested stock options and time-vesting restricted stock units will fully vest and all performance-based restricted stock units will fully vest at the greater of the target (100%) performance level or actual performance, measured as of the latest practicable date before the closing of the merger;

 

   

If Dennis Klaeser, Thomas Shafer or J. Brennan Ryan are terminated without cause, or if Mr. Klaeser or Mr. Ryan terminates his employment for good reason, each within six months before or two years following the merger, he will receive a lump sum cash severance payment and certain other benefits, and if Mr. Shafer experiences a good reason event within two years following the merger, he will receive a lump sum retention bonus but will not be entitled to a cash severance payment if he is later terminated without cause following the merger;

 

   

If certain Chemical executive officers, other than the named executive officers, are terminated by Chemical without cause, or if the executive terminates his or her employment for good reason, each within six months before or two years following the merger, the executive will receive a lump sum cash severance payment and certain other benefits;

 

   

David Provost and Gary Torgow entered into retention agreements with Chemical that will become effective on the closing date of the merger, pursuant to which Mr. Provost will serve as Executive Vice Chair of the board of directors of the combined company and Chair of the board of directors of the combined bank, and Mr. Torgow will serve as the Executive Chair of the board of directors of the combined company;

 

   

Mr. Torgow, Mr. Provost and six other members of the Chemical board of directors, to be designated by Chemical, will serve on the board of directors of the combined company; and

 

   

Four executive officers from Chemical—Mr. Provost, Mr. Shafer, Mr. Klaeser and Sandra Kuohn—will serve on the board of directors of the combined bank.

For a more complete description of these interests, see “The Merger—Interests of Chemical Directors and Executive Officers in the Merger” beginning on page  94.

Interests of TCF Directors and Executive Officers in the Merger (page 100)

In considering the recommendation of the TCF board of directors with respect to the merger, TCF shareholders should be aware that certain of TCF’s directors and executive officers have interests in the merger, including financial interests, that may be different from, or in addition to, the interests of the other TCF shareholders generally. The TCF board of directors was aware of and considered these interests during its deliberations of the merits of the merger and in determining to recommend to TCF shareholders that they vote to approve the TCF merger proposal and thereby approve the transactions contemplated by the merger agreement, including the merger.

These interests include, among others:

 

   

TCF equity awards, including those held by directors and executive officers, will convert, as of the effective time of the merger, into equity awards of Chemical of approximately equivalent value and subject to the same terms and conditions (taking into account any vesting upon the



 

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occurrence of the effective time that is applicable to the TCF equity awards granted to TCF’s non-employee directors and the calculation and fixing of performance-based awards described in the bullet below), which will vest in full upon a covered termination of employment within two years following the effective time of the merger;

 

   

TCF equity awards that are subject to performance-based vesting, including those held by executive officers, will be calculated and fixed as of the effective time and converted into service-based vesting awards with the applicable vesting date to be the last day of the original performance period, assuming achievement of applicable performance conditions at the greater of target and actual performance through the last practicable date prior to the effective time of the merger;

 

   

Certain of TCF’s executive officers are entitled to severance benefits under change in control severance agreements in the event of a qualifying termination following the effective time of the merger;

 

   

Craig Dahl has entered into an amended employment agreement with TCF that governs the terms of his employment following the effective time of the merger;

 

   

TCF’s directors and executive officers are entitled to continued indemnification and insurance coverage under the merger agreement;

 

   

Mr. Dahl, Vance Opperman and six other members of the TCF board of directors to be designated by TCF will serve on the board of directors of the combined company; and

 

   

Six executive officers from TCF—Mr. Dahl, Michael Jones, William Henak, James Costa, Thomas Butterfield, Brian Maass and Patricia Jones—will serve on the board of directors of the combined bank.

For a more complete description of these interests, see “The Merger—Interests of TCF Directors and Executive Officers in the Merger” beginning on page 100.

Governance Matters (page 120)

Board of Directors of Chemical

Upon completion of the merger, the board of directors of the combined company will be comprised of 16 directors, with eight directors designated by each of Chemical and TCF. For a period of 36 months following the effective time of the merger, there will be eight “Legacy Chemical Directors,” which are the directors initially designated by Chemical (two of whom will be Gary Torgow and David Provost); and eight “Legacy TCF Directors,” which are the directors initially designated by TCF (two of whom will be Craig Dahl and Vance Opperman).

Executive Management of Chemical

At the effective time of the merger, Mr. Torgow will continue to serve as Chair of the combined company and the board of directors, Mr. Provost will become and serve as Vice Chair of the combined company and the board of directors, Mr. Dahl will become and serve as Chief Executive Officer and President of the combined company and Mr. Opperman will become and serve as Lead Director of the board of directors. For the 36-month period following the effective time of the merger, any removal of, termination of employment of, amendment or modification to any employment or similar agreement adversely affecting, or modification to any duties, authority or reporting relationships set forth in the bylaws of any of the persons set forth in the preceding sentence, will require the affirmative vote of at least 75% of the entire board of directors.                



 

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Executive Management of TCF Bank

The combined company, in its capacity as sole shareholder of TCF Bank, will cause TCF Bank to appoint Mr. Provost as Chairman of TCF Bank and Mr. Dahl as Chief Executive Officer of TCF Bank. For the 36-month period following the effective time of the merger, the combined company will cause TCF Bank not to remove, terminate the employment of, appoint a replacement for, or amend or modify any employment or similar agreement in a way adversely affecting either of Messrs. Provost or Dahl with regard to the foregoing capacities except with the affirmative vote of 75% of the entire board of directors. For the 36-month period following the effective time of the merger, the combined company may not exercise its authority to modify, amend or repeal any of the provisions of the bylaws of TCF Bank relating to the duties, authority or reporting relationships of the Chairman or the Chief Executive Officer of TCF Bank without the affirmative vote of at least 75% of the entire board of directors.

For a more complete description of certain governance provisions, see “The Merger Agreement—Corporate Governance” beginning on page 120.

Litigation Relating to the Merger (page 107)

Certain litigation is pending in connection with the merger. For more information, see “The Merger—Litigation Relating to the Merger” beginning on page 107.

Regulatory Approvals Required for the Merger (page 108)

Subject to the terms of the merger agreement, both Chemical and TCF have agreed to use their reasonable best efforts to obtain as promptly as reasonably practicable all regulatory approvals necessary or advisable to complete the transactions contemplated by the merger agreement, including the merger and the bank merger, and comply with the terms and conditions of such approvals. These approvals include approvals from the Board of Governors of the Federal Reserve System, which we refer to as the Federal Reserve Board, in connection with the merger, and the Office of the Comptroller of the Currency, which we refer to as the OCC, in connection with the bank merger. Notifications and/or applications requesting approval for the transactions contemplated by the merger agreement may also be submitted to other federal and state regulatory authorities and self-regulatory organizations. Chemical, TCF and/or their respective subsidiaries filed notices and applications to obtain the necessary regulatory approvals on March 15, 2019. The completion of the merger is also subject to the expiration of certain waiting periods and other requirements. Although neither Chemical nor TCF knows of any reason why it would not be able to obtain the necessary regulatory approvals to complete the merger and bank merger, as applicable, in a timely manner, neither Chemical nor TCF can be certain when or if it will obtain such approvals or, if obtained, whether such approvals will contain terms, conditions or restrictions not currently contemplated that will restrain, prevent or delay the closing of the merger or contain any condition or restriction that would reasonably be expected to have a material adverse effect on Chemical and its subsidiaries, taken as a whole, after giving effect to the merger (measured on a scale relative to TCF and its subsidiaries, taken as a whole after giving effect to the merger), which we refer to as a materially burdensome regulatory condition. For more information regarding the regulatory approvals to which completion of the merger and bank merger are subject, see “Regulatory Approvals Required for the Merger” beginning on page 108.

Conditions to the Merger (page 125)

The obligations of Chemical and TCF to complete the merger are each subject to the satisfaction (or waiver, if permitted) of the following conditions:

 

   

the approval of each of the Chemical merger proposal and the Chemical articles amendment proposal by the requisite vote of the Chemical shareholders;

 

   

the approval of the TCF merger proposal by the requisite vote of the TCF common shareholders;

 

   

the authorization for listing on NASDAQ of the shares of Chemical common stock and depositary shares related to the Chemical Series C preferred stock to be issued in the merger;



 

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the receipt of all required regulatory approvals which are necessary to consummate the merger and the bank merger and the expiration of all statutory waiting periods without the imposition of any materially burdensome regulatory condition;

 

   

the effectiveness of the registration statement on Form S-4, of which this joint proxy statement/prospectus is a part, and the absence of a stop order or proceeding initiated or threatened by the SEC for that purpose;

 

   

the absence of any order, injunction, decree or other legal restraint preventing the consummation of the merger or any of the other transactions contemplated by the merger agreement or making the consummation of the merger illegal;

 

   

the absence of any statute, rule or regulation enacted, entered, promulgated or enforced by any governmental entity which prohibits or makes illegal consummation of the merger;

 

   

subject to certain exceptions, the accuracy of the representations and warranties of the other party, generally subject to a material adverse effect qualification;

 

   

the prior performance in all material respects by the other party of the obligations required to be performed by it at or before the closing date of the merger; and

 

   

receipt by each party of an opinion from its counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.

Neither TCF nor Chemical can be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed. For more information see “The Merger Agreement—Conditions to Complete the Merger” beginning on page 125.

Agreement Not to Solicit Other Offers (page 124)

Under the terms of the merger agreement, each of Chemical and TCF has agreed not to initiate, solicit, knowingly encourage or knowingly facilitate inquiries or proposals with respect to, or engage or participate in any negotiations concerning, or provide any confidential or nonpublic information or data to, or have or participate in any discussions with any person relating to, or enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or other definitive transaction agreement (other than a confidentiality agreement described in this paragraph) relating to, any acquisition proposal. Notwithstanding these restrictions, the merger agreement provides that, under specified circumstances, in response to an unsolicited bona fide written acquisition proposal which, in the good faith judgment of the Chemical board of directors or TCF board of directors, as applicable, after receiving the advice of its outside counsel and financial advisors, is or would reasonably be likely to result in a proposal which is superior to the merger, Chemical or TCF, as applicable, may furnish nonpublic information or data regarding Chemical or TCF, as applicable, and participate in discussions or negotiations with such third party to the extent that the Chemical board of directors or TCF board of directors, as applicable, determines in good faith (after receiving the advice of its outside counsel and financial advisors) that failure to take such actions would be reasonably likely to violate its fiduciary duties under applicable law, provided, further, that prior to providing any such nonpublic information or data, Chemical or TCF, as applicable, will have entered into a confidentiality agreement with such third party on terms, in all material respects, no less favorable to it than the confidentiality agreement between Chemical and TCF and which shall not provide such third party with any exclusive right to negotiate with Chemical or TCF, as applicable.

Termination; Termination Fee (page 126)

The merger agreement may be terminated at any time by Chemical or TCF before the effective time of the merger, whether before or after approval or adoption of the merger agreement by the Chemical shareholders or TCF shareholders, as applicable, under the following circumstances:

 

   

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by either Chemical or TCF, if a required regulatory approval is denied by final, non-appealable action, or if a governmental entity has issued a final, non-appealable order permanently enjoining or otherwise prohibiting or making illegal the closing of the merger or the bank merger, unless the failure to obtain a required regulatory approval is due to the failure of the party seeking to terminate the merger agreement to perform or observe the covenants and agreements of such party set forth in the merger agreement;

 

   

by either Chemical or TCF, if the merger has not closed on or before January 27, 2020, which we refer to as the termination date, unless the failure to close by such date is due to the failure of the party seeking to terminate the merger agreement to perform or observe the covenants and agreements of such party set forth in the merger agreement; provided, that if on the termination date all other closing conditions are satisfied other than receipt of required regulatory approvals, then the termination date may be extended for a period of three months at the option of either Chemical or TCF;

 

   

by either Chemical or TCF, if there is a breach by the other party of any of the covenants or agreements or any of the representations or warranties (or any such representation or warranty shall cease to be true) contained in the merger agreement that would, individually or in the aggregate with other breaches by such party (or failures of such representations or warranties to be true), result in the failure of a closing condition, unless the breach (or failure to be true) is cured within 45 days following written notice of such breach (or failure to be true), or such fewer days as remain prior to the termination date; provided that the terminating party is not then in material breach of the merger agreement;

 

   

by TCF before the approval of the Chemical merger proposal and the Chemical articles amendment proposal by the Chemical shareholders, if (a) the Chemical board of directors (i) fails to recommend in this joint proxy statement/prospectus that the Chemical shareholders approve the Chemical merger proposal or withdraws, modifies or qualifies such recommendation in a manner adverse to TCF or publicly discloses that it has resolved to do so or fails to recommend against acceptance of a tender offer or exchange offer constituting an acquisition proposal within ten business days after the beginning of such tender or exchange or (ii) recommends or endorses an acquisition proposal or fails to issue a press release announcing opposition to such acquisition proposal within ten business days after an acquisition proposal is publicly announced or (b) Chemical breaches its obligation to call a shareholder meeting and recommend to its shareholders, in accordance with the terms of the merger agreement, the approval of the Chemical merger proposal and Chemical articles amendment proposal or to refrain from soliciting alternative acquisition proposals in any material respect; or

 

   

by Chemical prior to the approval of the TCF merger proposal by the TCF shareholders, if (a) the TCF board of directors (i) fails to recommend in this joint proxy statement/prospectus that the TCF shareholders approve the TCF merger proposal, or withdraws, modifies or qualifies such recommendation in a manner adverse to Chemical, or publicly discloses that it has resolved to do so or fails to recommend against acceptance of a tender offer or exchange offer constituting an acquisition proposal within ten business days after the beginning of such tender or exchange offer or (ii) recommends or endorses an acquisition proposal or fails to issue a press release announcing opposition to such acquisition proposal within ten business days after an acquisition proposal is publicly announced or (b) TCF breaches its obligation to call a shareholder meeting and recommend to its shareholders, in accordance with the terms of the merger agreement, the adoption of the merger agreement or to refrain from soliciting alternative acquisition proposals in any material respect.

TCF or Chemical may be required to pay a termination fee of $134.0 million to the other party, upon termination of the merger agreement under certain circumstances. For more information, see “The Merger Agreement—Termination; Termination Fee” beginning on page 126.



 

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Amendment, Waiver and Extension of the Merger Agreement (page 129)

Chemical and TCF may jointly amend the merger agreement, and each of Chemical and TCF may waive its right to require the other party to comply with particular provisions of the merger agreement. However, Chemical and TCF may not amend the merger agreement or waive their respective rights after the Chemical shareholders have approved the Chemical merger proposal or the TCF shareholders have approved the TCF merger proposal if the amendment or waiver would legally require further approval by the Chemical shareholders or the TCF shareholders, as applicable, without first obtaining such further approval.

For more information, see “The Merger Agreement—Amendment, Waiver and Extension of the Merger Agreement” beginning on page 129.

No Appraisal or Dissenter Rights (page 156)

TCF shareholders are not entitled to appraisal rights under the DGCL in connection with the merger. Chemical shareholders are not entitled to appraisal or dissenters’ rights under the MBCA in connection with the merger. For more information, see “No Appraisal or Dissenter Rights” beginning on page 156.

Comparison of Rights of TCF Shareholders and Chemical Shareholders (page 144)

Following the merger, the rights of TCF shareholders who become Chemical shareholders in the merger will no longer be governed by the laws of the State of Delaware, TCF’s amended and restated certificate of incorporation, which we refer to as the TCF charter, and TCF’s amended and restated bylaws, which we refer to as the TCF bylaws, and instead will be governed by the laws of the State of Michigan, as well as by Chemical’s articles of incorporation and bylaws, each as amended in accordance with the merger agreement. For more information, see “Comparison of Rights of TCF Shareholders and Chemical Shareholders” beginning on page 144.

Risk Factors (page 31)

You should consider all the information contained in or incorporated by reference into this joint proxy statement/prospectus in deciding how to vote for the proposals presented in the joint proxy statement/prospectus. In particular, you should consider the factors described under “Risk Factors” beginning on page 31.

Accounting Treatment of the Merger (page 111)

The merger will be accounted for as a reverse acquisition using the acquisition method of accounting, with Chemical treated as the legal acquirer and TCF treated as the accounting acquirer for financial reporting purposes.

Material U.S. Federal Income Tax Consequences of the Merger (page 130)

The merger is intended to qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code, and it is a condition to the respective obligations of Chemical and TCF to complete the merger that each receives a legal opinion to that effect. Therefore, for U.S. federal income tax purposes, as a result of the merger, a U.S. holder of shares of TCF common stock generally will not recognize gain or loss with respect to Chemical common stock received in the merger, but will recognize gain or loss with respect to any cash received in lieu of fractional shares of Chemical common stock. A holder of TCF Series C preferred stock that exchanges its TCF Series C preferred stock for Chemical Series C preferred stock generally will not recognize gain or loss on the receipt of Chemical Series C preferred stock.



 

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For more information, see “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 130.

The Parties (page 54)

Chemical Financial Corporation

333 W. Fort Street, Suite 1800

Detroit, Michigan

(800) 867-9757

Chemical Financial Corporation is a financial holding company headquartered in Detroit, Michigan, that was incorporated in the State of Michigan in August 1973. Chemical relocated its headquarters from Midland, Michigan to Detroit, Michigan effective July 25, 2018, and is the largest banking company headquartered in Michigan. Chemical’s common stock is listed on NASDAQ under the symbol “CHFC.” As of December 31, 2018, Chemical had total consolidated assets of $21.5 billion, total loans of $15.3 billion, total deposits of $15.6 billion and total shareholders’ equity of $2.8 billion. Chemical operates through a single subsidiary bank, Chemical Bank. As of December 31, 2018, Chemical Bank had 212 banking offices located in Michigan, Ohio and northern Indiana.

More information about Chemical is available by visiting the “Investor Information” tab of its website at www.chemicalbank.com. Information contained on Chemical’s website does not constitute part of, and is not incorporated into, this joint proxy statement/prospectus. For a complete description of Chemical’s business, financial condition, results of operations and other important information, please refer to Chemical’s filings with the SEC that are incorporated by reference in this document, including its Annual Report on Form 10-K for the year ended December 31, 2018. For instructions on how to find copies of these documents, see “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus.

TCF Financial Corporation

200 Lake Street East, Mail Code EXO-01-G

Wayzata, Minnesota 55391-1693

(952) 745-2760

TCF Financial Corporation is a national bank holding company, headquartered in Wayzata, Minnesota. Through its wholly-owned subsidiary TCF National Bank, TCF operated 314 bank branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota at December 31, 2018. TCF provides a full range of consumer-facing and commercial services, including consumer banking services in 47 states, commercial banking services in 42 states, commercial leasing and equipment financing in all 50 states and, to a limited extent, in foreign countries and commercial inventory financing in all 50 states and Canada and, to a limited extent, in other foreign countries.

More information about TCF is available by visiting the “About TCF” tab of its website at www.tcfbank.com. Information contained on TCF’s website does not constitute part of, and is not incorporated into, this joint proxy statement/prospectus. For a complete description of TCF’s business, financial condition, results of operations and other important information, please refer to TCF’s filings with the SEC that are incorporated by reference in this document, including its Annual Report on Form 10-K for the year ended December 31, 2018. For instructions on how to find copies of these documents, see “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus.



 

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SELECTED HISTORICAL FINANCIAL DATA FOR CHEMICAL

The following tables set forth a summary of selected historical consolidated financial information of Chemical as of and for the years ended December 31, 2018, 2017, 2016, 2015 and 2014. The summary selected balance sheet data as of December 31, 2018 and 2017 and the summary selected income statement data for the years ended December 31, 2018, 2017 and 2016 was derived from Chemical’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2018, incorporated by reference in this joint proxy statement/prospectus. The summary selected balance sheet data as of December 31, 2016, 2015 and 2014 and the summary selected income statement data for the years ended December 31, 2015 and 2014 were derived from Chemical’s audited consolidated financial statements for each respective year that are not included in this joint proxy statement/prospectus or incorporated by reference in this joint proxy statement/prospectus. You should read this information in conjunction with Chemical’s consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Chemical’s Annual Report on Form 10-K for the year ended December 31, 2018. See “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus and “Incorporation of Certain Documents by Reference” beginning on page 163.

 

     As of and for the years ended December 31,  
(Dollars in thousands, except per share data)    2018      2017      2016      2015      2014  

Income Statement

              

Interest income

   $ 775,996      $ 632,135      $ 410,379      $ 291,789      $ 227,261  

Interest expense

     143,663        74,557        29,298        17,781        14,710  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

     632,333        557,578        381,081        274,008        212,551  

Provision for loan losses

     30,750        23,300        14,875        6,500        6,100  

Noninterest income

     148,536        144,019        122,350        80,216        63,095  

Operating expenses

     424,198        421,994        338,418        223,894        179,925  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     325,921        256,303        150,138        123,830        89,621  

Income tax expense

     41,901        106,780        42,106        37,000        27,500  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 284,020      $ 149,523      $ 108,032      $ 86,830      $ 62,121  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Per Common Share Data

              

Net Income

              

Basic

   $ 3.98      $ 2.11      $ 2.21      $ 2.41      $ 1.98  

Diluted

     3.94        2.08        2.17        2.39        1.97  

Cash dividends declared and paid

     1.24        1.10        1.06        1.00        0.94  

Book value at end of period

     39.69        37.48        36.57        26.62        24.32  

Tangible book value per share (non-GAAP)(1)

     23.54        21.21        20.20        18.73        18.57  

Balance Sheet Data

              

Total assets

   $ 21,498,341      $ 19,280,873      $ 17,355,179      $ 9,188,797      $ 7,322,143  

Investment securities

     3,645,931        2,640,639        1,858,391        1,063,702        1,065,277  

Loans, net of deferred fees and costs

     15,269,779        14,155,267        12,990,779        7,271,147        5,688,230  

Deposits

     15,593,282        13,642,803        12,873,122        7,456,767        6,078,971  

Liabilities

     18,662,081        16,612,124        14,773,653        8,172,823        6,525,010  

Shareholders’ equity

     2,836,260        2,668,749        2,581,526        1,015,974        797,133  

Tangible shareholders’ equity (non-GAAP)(1)

     1,682,383        1,510,011        1,425,998        714,901        606,419  


 

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     As of and for the years ended December 31,  

(Dollars in thousands, except per share data)

   2018     2017     2016     2015     2014  

Performance Ratios

          

Net interest margin

     3.48     3.40     3.51     3.49     3.49

Net interest margin (fully taxable equivalent)(1)

     3.53     3.48     3.60     3.58     3.59

Return on average assets

     1.41     0.81     0.90     1.02     0.96

Return on average shareholders’ equity

     10.40     5.70     7.00     9.40     8.20

Return on average tangible shareholders’ equity (Non-GAAP)(1)

     17.90     10.20     11.20     12.90     10.40

Efficiency ratio (GAAP)

     54.30     60.10     67.20     63.20     65.30

Efficiency ratio-adjusted (non-GAAP)(1)

     51.50     51.90     54.40     58.70     60.90

Dividend payout ratio

     31.50     52.90     48.80     41.80     47.70

Consolidated Capital Ratios

          

Shareholders’ equity as a percentage of total assets

     13.20     13.80     14.90     11.10     10.90

Common equity tier 1 capital(2)

     10.70     10.20     10.70     10.60     N/A  

Tier 1 leverage ratio(2)

     8.70     8.30     9.00     8.60     9.30

Tier 1 risk-based capital ratio(2)

     10.70     10.20     10.70     10.70     11.10

Total risk-based capital ratio(2)

     11.50     11.00     11.50     11.80     12.40

Asset Quality

          

Net loan charge-offs as a percentage of average loans

     0.09     0.07     0.11     0.13     0.19

Allowance for originated loan losses as a percentage of total originated loans

     0.93     0.94     1.05     1.26     1.51

Allowance for originated loan losses as a percentage of nonaccrual loans

     128.20     145.60     176.50     117.80     148.50

Nonaccrual loans as a percentage of total loans

     0.56     0.45     0.34     0.86     0.89

Nonperforming assets as a percentage of total assets

     0.43     0.37     0.35     0.79     0.89

 

(1)

Denotes a non-GAAP Financial Measure. See section entitled “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” in Chemical’s Annual Report on Form 10-K for the year ended December 31, 2018 for a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measure.

(2)

The years ended December 31, 2018, 2017, 2016 and 2015 are under BASEL III framework and the year ended December 31, 2014 is under the Basel I framework. The Common Equity Tier 1 (CET1) capital ratio is a new ratio introduced under the Basel III framework.



 

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SELECTED HISTORICAL FINANCIAL DATA FOR TCF

The following tables set forth a summary of selected historical consolidated financial information of TCF as of and for the years ended December 31, 2018, 2017, 2016, 2015 and 2014. The summary selected balance sheet data as of December 31, 2018 and 2017 and the summary selected income statement data for the years ended December 31, 2018, 2017 and 2016 was derived from TCF’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2018, incorporated by reference in this joint proxy statement/prospectus. The summary selected balance sheet data as of December 31, 2016, 2015 and 2014 and the summary selected income statement data for the years ended December 31, 2015 and 2014 were derived from TCF’s audited consolidated financial statements for each respective year that are not included in this joint proxy statement/prospectus or incorporated by reference in this joint proxy statement/prospectus. You should read this information in conjunction with TCF’s consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in TCF’s Annual Report on Form 10-K for the year ended December 31, 2018. See “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus and “Incorporation of Certain Documents by Reference” beginning on page 163.

 

    At or For the Year Ended December 31,  
(Dollars in thousands, except per share data)   2018     2017     2016     2015     2014  

Consolidated Income:

         

Net interest income

  $ 992,007     $ 925,238     $ 848,106     $ 820,388     $ 815,629  

Non-interest income

    470,885       448,299       465,900       441,998       433,267  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

    1,462,892       1,373,537       1,314,006       1,262,386       1,248,896  

Provision for credit losses

    46,768       68,443       65,874       52,944       95,737  

Non-interest expense

    1,014,400       1,059,934       909,887       894,747       871,777  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense (benefit)

    401,724       245,160       338,245       314,695       281,382  

Income tax expense (benefit)

    86,096       (33,624     116,528       108,872       99,766  

Income attributable to non-controlling interest

    11,270       10,147       9,593       8,700       7,429  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to TCF Financial Corporation

    304,358       268,637       212,124       197,123       174,187  

Preferred stock dividends

    11,588       19,904       19,388       19,388       19,388  

Impact of preferred stock redemption

    3,481       5,779       —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common shareholders

  $ 289,289     $ 242,954     $ 192,736     $ 177,735     $ 154,799  

Earnings per common share:

         

Basic

  $ 1.75     $ 1.44     $ 1.15     $ 1.07     $ 0.95  

Diluted

    1.74       1.44       1.15       1.07       0.94  

Dividends declared

    0.60       0.30       0.30       0.225       0.20  

Consolidated Financial Condition:

         

Loans and leases

  $ 19,072,311     $ 19,104,460     $ 17,843,827     $ 17,435,999     $ 16,401,646  

Total assets

    23,699,612       23,002,159       21,441,326       20,689,609       19,393,656  

Deposits

    18,903,686       18,335,002       17,242,522       16,719,989       15,449,882  

Borrowings

    1,449,472       1,249,449       1,077,572       1,039,938       1,235,535  

Total equity

    2,556,260       2,680,584       2,444,645       2,306,917       2,135,364  

Book value per common share

    14.45       13.96       12.66       11.94       11.10  

Tangible book value per common share(1)

    13.38       12.92       11.33       10.59       9.72  


 

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     At or For the Year Ended December 31,  
(Dollars in thousands, except per share data)    2018     2017     2016     2015     2014  

Financial Ratios:

          

Return on average assets

     1.37     1.26     1.05     1.03     0.96

Return on average common equity

     12.42       10.80       9.13       9.19       8.71  

Adjusted return on average common equity(1)

     13.51       10.80       9.13       9.19       8.71  

Return on average tangible common equity(1)

     13.56       15.73       10.29       10.48       10.08  

Adjusted return on average tangible common equity(1)

     14.74       15.73       10.29       10.48       10.08  

Net interest margin(2)

     4.63       4.54       4.34       4.42       4.61  

Common equity to assets

     9.99       10.42       10.09       9.80       9.58  

Dividend payout ratio

     34.48       20.83       26.09       21.03       21.28  

Efficiency ratio

     69.34       77.17       69.25       70.88       69.80  

Adjusted efficiency ratio(1)

     67.15       77.17       69.25       70.88       69.80  

Credit Quality Ratios:

          

Non-accrual loans and leases as a percentage of total loans and leases

     0.56     0.62     1.02     1.15     1.32

Non-performing assets as a percentage of total loans and leases and other real estate owned

     0.65       0.72       1.28       1.43       1.71  

Allowance for loan and lease losses as a percentage of total loans and leases

     0.83       0.90       0.90       0.90       1.00  

Net charge-offs as a percentage of average loans and leases

     0.29       0.24       0.26       0.30       0.49  

 

(1)

See “Item 7. Management’s Discussion and Analysis - Consolidated Financial Condition Analysis - Non-GAAP Financial Measures” in TCF’s Annual Report on Form 10-K for the year ended December 31, 2018 for a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure.

(2)

Net interest income on a fully tax-equivalent basis divided by average interest-earning assets.



 

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SUMMARY UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED

FINANCIAL INFORMATION

The following table shows summary unaudited pro forma combined condensed consolidated financial information about the financial condition and results of operations after giving effect to the merger and other pro forma adjustments. The information below should be read in conjunction with “Unaudited Pro Forma Combined Condensed Consolidated Financial Information” beginning on page 133.

 

In thousands       
     Year Ended
December 31, 2018
 

Statement of Income

  

Net interest income

   $ 1,650,284  

Provision for credit losses

     77,518  

Noninterest income

     619,421  

Operating expenses

     1,463,963  
  

 

 

 

Income before income tax expense

     728,224  

Income tax expense

     128,118  
  

 

 

 

Income after income tax expense

     600,106  

Income attributable to non-controlling interest

     11,270  

Preferred stock dividends and impact of preferred stock redemption

     15,069  
  

 

 

 

Net income available to common shareholders

   $ 573,767  
  

 

 

 
     As of
December 31, 2018
 

Statement of Financial Condition

  

Investment securities

   $ 6,351,075  

Net loans and leases

     33,799,677  

Total assets

     45,497,949  

Deposits

     34,463,933  

Borrowings

     4,057,618  

Total shareholders’ equity

     5,578,407  


 

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UNAUDITED COMPARATIVE PER COMMON SHARE DATA

The following table shows information about earnings per share, dividends paid per share and tangible book value per share, on a historical basis and on a pro forma combined and pro forma equivalent per share basis. The information below should be read in conjunction with “Unaudited Pro Forma Combined Condensed Consolidated Financial Information” beginning on page 133.

 

Comparative Per Share Data   

Chemical
Historical
    

TCF
Historical
    

Pro Forma
Combined (1)(2)
     Equivalent
Pro Forma
Per Share
of TCF (3)
 

Year ended December 31, 2018:

           

Basic earnings

   $ 3.98      $ 1.75      $ 3.75      $ 1.91  

Diluted earnings

     3.94        1.74        3.73        1.90  

Cash dividends paid

     1.24        0.60        1.24        0.63  

Tangible book value (period end)

     23.54        13.38        22.98        11.68  

 

(1)

The pro forma combined earnings per share amounts were calculated by totaling the historical earnings of Chemical and TCF, adjusted for purchase accounting entries and other capital actions, and dividing the resulting amount by the average pro forma shares of Chemical and TCF, giving effect to the merger as if it had occurred as of the beginning of the period presented, excluding any merger transaction costs. The pro forma combined tangible book value amount, however, does include the impact of estimated contractually obligated merger costs due upon completion of the merger. The average pro forma shares of Chemical and TCF reflect historical basic and diluted shares, plus historical basic and diluted average shares of TCF, as adjusted based on the fixed exchange ratio of 0.5081 shares of Chemical common stock for each share of TCF common stock. The number of shares to be issued is subject to adjustment in certain limited circumstances.

(2)

Pro forma combined cash dividends paid represents Chemical’s historical amounts only.

(3)

The equivalent pro forma per share amounts of TCF were calculated by multiplying the pro forma combined amounts by the fixed exchange ratio of 0.5081 shares of Chemical common stock for each share of TCF common stock.



 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

The table below sets forth, for the calendar quarters indicated, the high and low sales prices, as well as the dividend declared, per share of Chemical common stock, which trades on the NASDAQ under the symbol “CHFC,” and per share of TCF common stock, which trades on the NYSE under the symbol “TCF.”

 

     Chemical Common Stock      TCF Common Stock  
     High      Low      Dividend      High      Low      Dividend  

2015

                 

First Quarter

   $ 31.56      $ 28.16      $ 0.24      $ 16.31      $ 13.78      $ 0.075  

Second Quarter

     34.27        29.73        0.24        17.29        14.93        0.075  

Third Quarter

     34.49        30.09        0.26        17.07        14.35        0.075  

Fourth Quarter

     37.26        30.98        0.26        15.94        13.78        0.075  

2016

                 

First Quarter

   $ 36.45      $ 29.40      $ 0.26      $ 13.97      $ 10.37      $ 0.075  

Second Quarter

     40.14        34.29        0.26        14.48        11.62        0.075  

Third Quarter

     47.62        35.73        0.27        14.78        11.72        0.075  

Fourth Quarter

     55.55        40.93        0.27        19.97        13.73        0.075  

2017

                 

First Quarter

   $ 54.98      $ 47.52      $ 0.27      $ 20.03      $ 15.33      $ 0.075  

Second Quarter

     51.52        44.22        0.27        17.47        14.89        0.075  

Third Quarter

     46.42        43.61        0.28        17.20        14.58        0.075  

Fourth Quarter

     58.17        50.39        0.28        21.29        16.71        0.075  

2018

                 

First Quarter

   $ 59.83      $ 52.40      $ 0.28      $ 23.80      $ 20.41      $ 0.15  

Second Quarter

     59.46        52.98        0.28        27.34        21.99        0.15  

Third Quarter

     59.10        53.34        0.34        26.55        23.57        0.15  

Fourth Quarter

     54.47        34.62        0.34        24.82        18.17        0.15  

2019

                 

First Quarter

   $ 47.71      $ 36.01      $ 0.34      $ 23.83      $ 19.18      $ 0.15  

On January 25, 2019, the last trading day before the public announcement of the signing of the merger agreement, the closing sale price per share of Chemical common stock on the NASDAQ was $42.47 and the closing sale price per share of TCF common stock on the NYSE was $21.58. On May 1, 2019, the latest practicable trading date before the date of this joint proxy statement/prospectus, the last sale price per share of Chemical common stock on the NASDAQ was $43.26 and the last sale price per share of TCF common stock on the NYSE was $21.81.



 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus and the documents incorporated by reference into this joint proxy statement/prospectus contain forward-looking statements regarding Chemical’s and TCF’s outlook or expectations with respect to the merger, including the expected costs to be incurred and cost savings to be realized in connection with the merger, the expected impact of the merger on the combined company’s future financial performance (including anticipated accretion to earnings per share), the assumed purchase accounting adjustments, other key transaction assumptions, the timing of the closing of the merger and consequences of the integration of the businesses and operations of Chemical and TCF. Words such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “plan,” “predict,” “project,” “forecast,” “guidance,” “goal,” “objective,” “prospects,” “possible” or “potential,” by future conditional verbs such as “assume,” “will,” “would,” “should,” “could” or “may,” or by variations of such words or by similar expressions are intended to identify such forward-looking statements. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time, are difficult to predict and are generally beyond the control of either company. Forward-looking statements speak only as of the date they are made and Chemical and TCF assume no duty to update forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results. Actual results may differ materially from current projections.

In addition to factors previously disclosed in Chemical’s and TCF’s reports filed with the SEC and those identified elsewhere in this joint proxy statement/prospectus (including the “Risk Factors” beginning on page 31), the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

 

   

the failure to obtain necessary regulatory approvals when expected or at all (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction);

 

   

the failure of either Chemical or TCF to obtain the requisite shareholder approvals, or to satisfy any of the other closing conditions to the transaction on a timely basis or at all;

 

   

the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement;

 

   

the possibility that the anticipated benefits of the merger, including anticipated cost savings and strategic gains, are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy, competitive factors in the areas where Chemical and TCF do business or as a result of other unexpected factors or events;

 

   

the impact of purchase accounting with respect to the merger, or any change in the assumptions used regarding the assets purchased and liabilities assumed to determine their fair value;

 

   

diversion of management’s attention from ongoing business operations and opportunities;

 

   

potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the merger;

 

   

the ability of either company to effectuate share repurchases and the prices at which such repurchases may be effectuated;

 

   

the integration of the businesses and operations of Chemical and TCF, which may take longer than anticipated or be more costly than anticipated or have unanticipated adverse results relating to Chemical’s or TCF’s existing businesses;

 

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challenges retaining or hiring key personnel;

 

   

business disruptions resulting from or following the merger;

 

   

delay in closing the merger and the bank merger;

 

   

the outcome of pending or threatened litigation or of matters before regulatory agencies, whether currently existing or commencing in the future, including litigation related to the merger;

 

   

increased capital requirements, other regulatory requirements or enhanced regulatory supervision;

 

   

the inability to sustain revenue and earnings growth;

 

   

the inability to efficiently manage operating expenses;

 

   

changes in interest rates and capital markets;

 

   

changes in asset quality and credit risk;

 

   

adverse changes in economic conditions;

 

   

capital management activities;

 

   

changes in Chemical’s stock price before closing, including as a result of the financial performance of TCF or Chemical prior to closing;

 

   

customer acceptance of Chemical’s and TCF’s products and services;

 

   

customer borrowing, repayment, investment and deposit practices;

 

   

the impact, extent and timing of technological changes;

 

   

changes in legislation, regulation, policies or administrative practices, whether by judicial, governmental or legislative action, including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act, otherwise referred to as the Dodd-Frank Act, and other changes pertaining to banking, securities, taxation, rent regulation and housing, financial accounting and reporting, environmental protection and insurance and the ability to comply with such changes in a timely manner;

 

   

changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Department of the Treasury and the Federal Reserve Board;

 

   

changes in accounting principles, policies, practices or guidelines;

 

   

the potential impact of announcement or consummation of the merger on relationships with third parties, including customers, vendors, employees and competitors;

 

   

failure to attract new customers and retain existing customers in the manner anticipated;

 

   

any interruption or breach of security resulting in failures or disruptions in customer account management, general ledger, deposit, loan or other systems;

 

   

natural disasters, war or terrorist activities; and

 

   

other actions of the Federal Reserve Board and legislative and regulatory actions and reforms.

Additional factors that could cause Chemical’s and TCF’s results to differ materially from those described in the forward-looking statements can be found in Chemical’s and TCF’s filings with the SEC, including Chemical’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and TCF’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. These and other factors are representative of the risk factors that may emerge and could cause a difference between an ultimate actual outcome and a forward-looking statement.

 

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RISK FACTORS

In addition to the other information contained in or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed under the caption “Cautionary Statement Regarding Forward-Looking Statements,” you should carefully consider the following risk factors in deciding how to vote on the proposals presented in this joint proxy statement/prospectus. See “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus and “Incorporation of Certain Documents by Reference” beginning on page 163.

Risks Related to the Merger

Because the exchange ratio is fixed and the market price of Chemical common stock will fluctuate, TCF shareholders cannot be certain of the market value of the merger consideration they will receive.

Upon completion of the merger, each outstanding share of TCF common stock, except for treasury stock or shares owned by TCF or Chemical (in each case other than in a fiduciary or agency capacity or as a result of debts previously contracted), will be converted into the right to receive 0.5081 shares of Chemical common stock. This exchange ratio is fixed in the merger agreement. The market value of the merger consideration will vary from the closing price of Chemical common stock on the date Chemical and TCF announced the merger, on the date that this joint proxy statement/prospectus is mailed to Chemical shareholders and TCF shareholders, on the date of the Chemical special meeting and the date of the TCF special meeting, and on the date the merger is completed. Any change in the market price of Chemical common stock prior to the completion of the merger will affect the market value of the merger consideration that TCF shareholders will receive upon completion of the merger, and there will be no adjustment to the merger consideration for changes in the market price of either shares of Chemical common stock or TCF common stock.

Changes in the market price of Chemical common stock and TCF common stock may result from a variety of factors, including, but not limited to, changes in sentiment in the market regarding Chemical’s and TCF’s operations or business prospects, including market sentiment regarding Chemical’s and/or TCF’s entry into the merger agreement. These risks may also be affected by:

 

   

operating results that vary from the expectations of Chemical’s and/or TCF’s management or of securities analysts and investors;

 

   

developments in Chemical’s and/or TCF’s business or in the financial services sector generally;

 

   

regulatory or legislative changes affecting the banking industry generally or Chemical’s and/or TCF’s business and operations;

 

   

operating and securities price performance of companies that investors consider to be comparable to Chemical and/or TCF;

 

   

changes in estimates or recommendations by securities analysts or rating agencies;

 

   

announcements of strategic developments, acquisitions, dispositions, financings and other material events by Chemical, TCF or their competitors; and

 

   

changes in global financial markets and economies and general market conditions, such as interest or foreign exchange rates, stock, commodity, credit or asset valuations or volatility.

Many of these factors are outside the control of Chemical and TCF. Accordingly, at the time of the Chemical special meeting and the TCF special meeting, Chemical shareholders and TCF shareholders will not know the precise market value of the merger consideration that TCF shareholders will receive upon completion of the merger. You should obtain current market quotations for both Chemical common stock and TCF common stock.

 

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Chemical shareholders and TCF shareholders will each have reduced ownership and voting interest in and will exercise less influence over management of the combined company.

Chemical shareholders currently have the right to vote in the election of the Chemical board of directors and on other matters affecting Chemical, and TCF common shareholders currently have the right to vote in the election of the TCF board of directors and on other matters affecting TCF. When the merger occurs, each TCF shareholder will become a shareholder of Chemical, and each TCF shareholder and Chemical shareholder will have a percentage ownership in the combined company that is much smaller than the shareholder’s percentage ownership of either TCF or Chemical individually. Based on the number of shares of Chemical common stock and TCF common stock outstanding at the close of business on the record dates of May 1, 2019 and April 30, 2019, respectively, and based on the number of shares of Chemical common stock expected to be issued in the merger, the former holders of TCF common stock as a group will receive shares in the merger constituting approximately 53.8% of the outstanding shares of Chemical common stock immediately after the merger. As a result, current shareholders of Chemical as a group will own approximately 46.2% of the outstanding shares of Chemical common stock immediately after the merger. Because of this, each TCF shareholder and Chemical shareholder will have less influence on the management and policies of the combined company than each now has on the management and policies of TCF or Chemical individually.

The market price of the Chemical common stock after the merger may be affected by factors different from those currently affecting the prices of Chemical common stock and TCF common stock.

The businesses of Chemical and TCF differ, and accordingly, the results of operations of the combined company and the market price of the shares of the Chemical common stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations and market prices of common stock of each of Chemical and TCF. For a discussion of the businesses of Chemical and TCF and of certain factors to consider in connection with those businesses, see “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus and “Incorporation of Certain Documents by Reference” beginning on page 163.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

Before the transactions contemplated in the merger agreement can be completed, various approvals must be obtained from the Board of Governors of the Federal Reserve System, which we refer to as the Federal Reserve Board, and the Office of the Comptroller of the Currency, which we refer to as the OCC. In deciding whether to grant these approvals, the relevant governmental entities will consider a variety of factors, including the regulatory standing of each of the parties and the effect of the merger on competition, and the factors described in the section of this joint proxy statement/prospectus entitled “Regulatory Approvals Required for the Merger” beginning on page 108. An adverse development in either party’s regulatory standing or other factors could result in an inability to obtain one or more of the required regulatory approvals or delay receipt of required approvals. The Federal Reserve Board has stated that if material weaknesses are identified by examiners before a banking organization applies to engage in expansionary activity, the Federal Reserve Board will expect the banking organization to resolve all such weaknesses before applying for such expansionary activity. The Federal Reserve Board has also stated that if issues arise during the processing of an application for expansionary activity, it will expect the applicant banking organization to withdraw its application pending resolution of any supervisory concerns. It is possible that other regulatory agencies, such as the OCC, could adopt similar expectations for applicants. Accordingly, if there is an adverse development in either party’s regulatory standing, Chemical may be required to withdraw its application for approval of the proposed merger and, if possible, resubmit it after the applicable supervisory concerns have been resolved. Similarly, in such an event, TCF Bank may also be required to withdraw its application for approval of the proposed bank merger, and, if possible, resubmit such application after the applicable supervisory concerns have been resolved.

 

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The approvals that are granted may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined company’s business or require changes to the terms of the transactions contemplated by the merger agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the merger agreement, imposing additional material costs on or materially limiting the revenues of the combined company following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the merger. Additionally, the completion of the merger is conditioned on the absence of certain orders, injunctions or decrees by any court or regulatory agency of competent jurisdiction that would prohibit or make illegal the completion of any of the transactions contemplated by the merger agreement.

Chemical and TCF believe that the proposed transactions should not raise significant regulatory concerns and that Chemical and TCF will be able to obtain all requisite regulatory approvals in a timely manner. However, the processing time for obtaining regulatory approvals for mergers of banks and bank holding companies, particularly for larger institutions, has increased since the financial crisis. Specifically, the Dodd-Frank Act requires bank regulators to consider financial stability concerns when evaluating a proposed transaction. In addition, despite the parties’ commitments to use their reasonable best efforts to comply with conditions imposed by regulators, under the terms of the merger agreement, neither Chemical nor TCF will be required, and neither party will be permitted without the prior written consent of the other party, to take actions or agree to conditions that would reasonably be expected to have a material adverse effect on Chemical and its subsidiaries, taken as a whole, after giving effect to the merger (measured on a scale relative to TCF and its subsidiaries, taken as a whole). See “Regulatory Approvals Required for the Merger” beginning on page 108.

The merger agreement may be terminated in accordance with its terms and the merger may not be completed.

The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the merger. Those conditions include: (i) the approval of the Chemical merger proposal and the Chemical articles amendment proposal, by the requisite vote of the Chemical shareholders; (ii) the approval of the TCF merger proposal, by the requisite vote of the TCF shareholders; (iii) authorization for listing on the NASDAQ of the shares of Chemical common stock and depositary shares representing 1/1000th interest in a share of Chemical Series C preferred stock to be issued in the merger; (iv) the receipt of all required regulatory approvals which are necessary to close the merger and the bank merger and the expiration of all statutory waiting periods without the imposition of any materially burdensome regulatory condition; (v) the effectiveness of the registration statement on Form S-4, of which this joint proxy statement/prospectus is a part, and the absence of a stop order or proceeding initiated or threatened by the SEC for that purpose; (vi) the absence of any order, injunction, decree or other legal restraint preventing the completion of the merger or any of the other transactions contemplated by the merger agreement or making the completion of the merger illegal; (vii) subject to certain exceptions, the accuracy of the representations and warranties of the other party, generally subject to a material adverse effect qualification; (viii) the prior performance in all material respects by the other party of the obligations required to be performed by it at or prior to the closing date of the merger; and (ix) receipt by each party of an opinion from its counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the Code.

These conditions to the closing of the merger may not be fulfilled in a timely manner or at all, and, accordingly, the merger may not be completed. In addition, the parties can mutually decide to terminate the merger agreement at any time, before or after shareholder approval, or Chemical or TCF may elect to terminate the merger agreement in certain other circumstances. See “The Merger Agreement—Termination; Termination Fee” beginning on page 126.

 

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Failure to complete the merger could negatively impact Chemical and TCF.

If the merger is not completed for any reason, including as a result of Chemical shareholders failing to approve either the Chemical merger proposal or the Chemical articles amendment proposal or TCF shareholders failing to approve the TCF merger proposal, the ongoing businesses of Chemical and TCF may be adversely affected, and, without realizing any of the benefits of having completed the merger, Chemical and TCF will be subject to a number of risks, including the following:

 

   

each company may be required, under certain circumstances, to pay the other party a termination fee of $134.0 million under the merger agreement;

 

   

each company will be required to pay certain costs relating to the merger, whether or not the merger is completed, such as legal, accounting, financial advisor and printing fees;

 

   

the merger agreement places certain restrictions on the conduct of each company’s business prior to completion of the merger, the waiver of which is subject to the consent of the other company, which may adversely affect each company’s ability to execute certain of its business strategies; and

 

   

matters relating to the merger may require substantial commitments of time and resources by Chemical and TCF management, which could otherwise have been devoted to other opportunities that may have been beneficial to Chemical and TCF, as applicable, as independent companies.

In addition, if the merger is not completed, Chemical and/or TCF may experience negative reactions from the financial markets and from their respective customers and employees. For example, Chemical and TCF businesses may be impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. The market price of Chemical or TCF common stock could decline to the extent that the current market prices reflect a market assumption that the merger will be completed. Chemical and/or TCF also could be subject to litigation related to any failure to complete the merger or to proceedings commenced against Chemical or TCF to perform their respective obligations under the merger agreement. If the merger is not completed, Chemical and TCF cannot assure their respective shareholders that the risks described above will not materialize and will not materially affect the business, financial results and stock prices of Chemical and/or TCF.

Failure to attract, motivate and retain executives and other key employees could diminish the anticipated benefits of the merger.

The success of the merger will depend in part on the retention of personnel critical to the business and operations of the combined company due to, for example, their customer relationships, skills or management expertise. Competition for qualified personnel can be intense.

Current and prospective employees of Chemical and TCF may experience uncertainty about their future roles with Chemical and TCF until strategies with regard to these employees are announced or executed, which may impair Chemical’s and TCF’s ability to attract, retain and motivate key management, commercial lenders, specialty lenders and other personnel prior to and following the merger. Employee retention may be particularly challenging during the pendency of the merger, as employees of Chemical and TCF may experience uncertainty about their future roles with the combined company. If Chemical and TCF are unable to retain personnel, including Chemical’s and TCF’s key management, who are critical to the successful integration and future operations of the companies, Chemical and TCF could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how, and unanticipated additional recruitment costs. In addition, the loss of key personnel could diminish the anticipated benefits of the merger.

 

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At the effective time, certain of Chemical’s and TCF’s executive officers are entitled to receive severance benefits upon a qualifying termination of employment following the completion of the merger. Accordingly, each of these executive officers could potentially terminate his or her employment following specified circumstances set forth in their applicable employment, change in control agreement or similar agreement, including certain changes in such executive’s duties or responsibilities (except with respect to certain contemplated changes in connection with the merger for Mr. Torgow, Mr. Dahl and Mr. Provost), compensation or office location, and become entitled to receive severance. See the section entitled “The Merger—Interests of Chemical Directors and Executive Officers in the Merger” beginning on page 94 and the section entitled “The Merger—Interests of TCF Directors and Executive Officers in the Merger” beginning on page 100 for a further discussion of some of these issues.

If key employees of Chemical or TCF depart, the integration of the companies may be more difficult and the combined company’s business following the merger may be harmed. Furthermore, the combined company may have to incur significant costs in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent relating to the business of each of Chemical or TCF, and the combined company’s ability to realize the anticipated benefits of the merger may be adversely affected.

Chemical and TCF will be subject to business uncertainties and contractual restrictions while the merger is pending, which could adversely affect each party’s business and operations.

Uncertainty about the effect of the merger on customers may have an adverse effect on Chemical and/or TCF. These uncertainties could cause customers and others that deal with Chemical and/or TCF to seek to change existing business relationships with Chemical and/or TCF. In addition, subject to certain exceptions, Chemical and TCF have each agreed to operate its business in the ordinary course prior to the closing date of the merger and each party is also restricted from making certain acquisitions and taking other specified actions without the consent of the other party until the merger occurs. These restrictions may prevent TCF and/or Chemical from pursuing attractive business opportunities that may arise prior to the completion of the merger. See “The Merger Agreement—Covenants and Agreements” beginning on page 117.

The directors and executive officers of Chemical and TCF have interests and arrangements that may be different from, or in addition to, those of Chemical shareholders or TCF shareholders generally.

When considering the recommendations of the boards of directors of Chemical and TCF, as applicable, with respect to the proposals described in this joint proxy statement/prospectus, you should be aware that the directors and executive officers of Chemical and TCF may have interest in the merger, which are different from, or in addition to, the interests of Chemical shareholders and TCF shareholders generally. These interests include, among others, the continued employment of certain executive officers of Chemical and TCF by the combined company, the continued service of certain directors of Chemical and TCF as directors of the combined company, severance arrangements, other compensation and benefits arrangements and the right to continued indemnification of former TCF directors and officers by the combined company. The Chemical board of directors was aware of these interests and considered these interests, among other matters, when making its decision to adopt the merger agreement and authorize the merger and approve the Chemical articles amendment and in recommending that the Chemical shareholders vote in favor of the Chemical merger proposal and the Chemical articles amendment proposal. See “The Merger—Interests of Chemical Directors and Executive Officers in the Merger” beginning on page 94. Likewise, the TCF board of directors was aware of these interests and considered these interests, among other matters, when making its decision to approve the merger agreement and authorize the merger and in recommending that the TCF shareholders vote in favor of the TCF merger proposal. See “The Merger—Interests of TCF Directors and Executive Officers in the Merger” beginning on page 100.

 

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The merger agreement contains provisions that could discourage a potential competing acquirer that might be willing to pay more to acquire or merge with either Chemical or TCF.

The merger agreement contains provisions that restrict each of Chemical’s and TCF’s ability to, among other things, initiate, solicit, knowingly encourage or knowingly facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to the exercise of fiduciary duties by each respective board of directors, engage in any negotiations concerning, or provide any confidential information relating to, any alternative acquisition proposals. These provisions, which include a $134.0 million termination fee payable under certain circumstances, might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of TCF or Chemical from considering or proposing that acquisition even, in the case of TCF, if it were prepared to pay consideration with a higher per share market price than that proposed in the merger, or might result in a potential competing acquirer proposing to pay a lower per share price to acquire TCF or Chemical than it might otherwise have proposed to pay because of Chemical’s and TCF’s, as applicable, obligation, in connection with termination of the merger agreement under certain circumstances, to pay the other party a $134.0 million termination fee. In addition, the merger agreement requires that each of Chemical and TCF submit the merger proposal to a vote of its respective shareholders, even if the respective board of directors changes its recommendation in favor of the merger proposal in a manner adverse to the other party. For more information, see “The Merger Agreement—Agreement Not to Solicit Other Offers,” “The Merger Agreement—Termination; Termination Fee” and “The Merger Agreement—Chemical Shareholder Meeting and TCF Shareholder Meeting and Recommendations of Their Respective Boards of Directors” beginning on pages 124, 126 and 123, respectively.

The opinions of Chemical’s and TCF’s financial advisors delivered to the parties’ respective boards of directors prior to the signing of the merger agreement will not reflect changes in circumstances occurring after the date of such opinions.

Each of the opinions of Chemical’s and TCF’s financial advisors was delivered on, and dated, January 27, 2019. Changes in the operations and prospects of Chemical or TCF, general market and economic conditions and other factors that may be beyond the control of Chemical or TCF may significantly alter the value of Chemical or TCF or the prices of the Chemical common stock or TCF common stock by the time the merger is completed. The opinions do not speak as of the time the merger will be completed or as of any date other than the date of such opinions. See “The Merger—Opinion of Chemical’s Financial Advisor” beginning on page 76 and “The Merger—Opinion of TCF’s Financial Advisor” beginning on page 86.

TCF shareholders will become shareholders of a Michigan corporation and will have their rights as shareholders governed by Chemical’s organizational documents and Michigan law.

As a result of the completion of the merger, TCF shareholders will become shareholders of Chemical, and their rights as shareholders of Chemical will be governed by Chemical’s organizational documents and the Michigan Business Corporation Act, which we refer to as the MBCA. As a result, there will be differences between the rights currently enjoyed by TCF shareholders and the rights they expect to have as shareholders of the combined company. See “Comparison of Rights of TCF Shareholders and Chemical Shareholders” beginning on page 144.

Chemical and TCF will incur transaction and integration costs in connection with the merger.

Chemical and TCF have incurred and expect to incur significant, non-recurring costs in connection with negotiating the merger agreement and closing the merger. In addition, the combined company will incur integration costs following the completion of the merger as Chemical and TCF integrate the businesses of the two companies, including facilities and systems consolidation costs and employment-related costs. There can be no assurances that the expected benefits and efficiencies related to the integration of the businesses will be realized to offset these transaction and integration costs over time. Chemical and TCF may also incur additional

 

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costs to maintain employee morale and to retain key employees. Chemical and TCF will also incur significant legal, financial advisor, accounting, banking and consulting fees, fees relating to regulatory filings and notices, SEC filing fees, printing and mailing fees and other costs associated with the merger. Some of these costs are payable regardless of whether the merger is completed. See “The Merger Agreement—Expenses and Fees” beginning on page 129.

Lawsuits challenging the merger have been filed against TCF and additional such lawsuits may be filed against TCF and Chemical, and an adverse judgment in any such lawsuit or any future similar lawsuits may prevent the merger from becoming effective or from becoming effective within the expected timeframe.

Shareholders of TCF and/or shareholders of Chemical may file lawsuits against TCF, Chemical and/or the directors and officers of either company in connection with the merger. For more information about current litigation that is pending in connection with the merger, see “The Merger—Litigation Relating to the Merger” beginning on page 107. One of the conditions to the closing of the merger is that no order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition that prevents the closing of the merger or any of the other transactions contemplated by the merger agreement be in effect. If any plaintiff were successful in obtaining an injunction prohibiting TCF or Chemical defendants from completing the merger on the agreed upon terms, then such injunction may prevent the merger from becoming effective or from becoming effective within the expected timeframe and could result in significant costs to TCF and/or Chemical, including any cost associated with the indemnification of directors and officers. If a lawsuit is filed, the defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is completed may adversely affect the combined company’s business, financial condition, results of operations and cash flow.

Neither Chemical shareholders nor TCF shareholders will have dissenters’ or appraisal rights in the merger.

Dissenters’ or appraisal rights are statutory rights that, if applicable under law, enable shareholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the extraordinary transaction. Under the MBCA and DGCL, a Chemical shareholder or TCF shareholder, respectively, may not dissent from a merger as to shares that are listed on a national securities exchange at the record date fixed to determine the shareholders entitled to receive notice of the meeting of shareholders to vote upon the agreement of merger or consolidation. Notwithstanding the foregoing, appraisal rights are available if shareholders are required by the terms of the merger agreement to accept for their shares anything other than (a) shares of stock of the surviving corporation, (b) shares of stock of another corporation that will either be listed on a national securities exchange or held of record by more than 2,000 holders, (c) cash instead of fractional shares or (d) any combination of clauses (a)-(c).

Pursuant to the MBCA, holders of Chemical common stock will not be entitled to dissenters’ or appraisal rights in the merger with respect to their shares of Chemical common stock because Chemical common stock is listed on the NASDAQ, a national securities exchange, and is expected to continue to be so listed on the record date. Pursuant to the DGCL, holders of TCF common stock will not be entitled to dissenters’ or appraisal rights in the merger with respect to their shares of TCF common stock because TCF common stock is listed on the NYSE, a national securities exchange, and is expected to continue to be so listed on the record date, and because holders of TCF common stock will receive shares of Chemical common stock in the merger, which is expected to be listed on NASDAQ upon the effective time of the merger.

Risks Relating to the Combined Company

The failure to successfully combine the businesses of Chemical and TCF may adversely affect the combined company’s future results.

The success of the merger will depend, in part, on the ability of the combined company to realize anticipated benefits from combining the businesses of Chemical and TCF. To realize these anticipated benefits,

 

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the businesses of Chemical and TCF must be successfully combined. If the combined company is not able to achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected.

The failure to integrate successfully the businesses and operations of Chemical and TCF in the expected time frame may adversely affect the combined company’s future results.

Chemical and TCF have operated and, until the completion of the merger, will continue to operate independently. There can be no assurances that their businesses can be integrated successfully. It is possible that the integration process could result in the loss of key Chemical employees or key TCF employees, the loss of customers, the disruption of either company’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, the following issues, among others, must be addressed in integrating the operations of Chemical and TCF in order to realize the anticipated benefits of the merger so the combined company performs as expected:

 

   

combining the companies’ operations and corporate functions;

 

   

combining the businesses of Chemical and TCF in a manner that permits the combined company to achieve the cost savings and revenue synergies anticipated to result from the merger, the failure of which would result in the anticipated benefits of the merger not being realized in the time frame currently anticipated or at all;

 

   

integrating personnel from the two companies;

 

   

integrating the companies’ technologies;

 

   

identifying and eliminating redundant functions;

 

   

harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes;

 

   

addressing possible differences in business backgrounds, corporate cultures and management philosophies and priorities;

 

   

managing the movement of certain positions to different locations;

 

   

coordinating a geographically dispersed organization;

 

   

integrating the branches of the combined company; and

 

   

limiting the outflow of deposits held by new customers and successfully retaining and managing interest-earning assets (i.e., loans) of the combined company.

In addition, at times the attention of certain members of either company’s or both companies’ management and resources may be focused on completion of the merger and the integration of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt each company’s ongoing business and the business of the combined company.

Furthermore, the board of directors and executive leadership of the combined company will consist of former directors and executive officers from each of Chemical and TCF. Combining the boards of directors and management teams of each company into a single board and a single management team could require the reconciliation of differing priorities and philosophies.

Combining the businesses of Chemical and TCF may be more difficult, costly or time-consuming than expected and the combined company may fail to realize the anticipated benefits of the merger, which may adversely affect the combined company’s business results and negatively affect the value of the common stock of the combined company following the merger.

 

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The success of the merger will depend on, among other things, the ability of Chemical and TCF to combine their businesses in a manner that facilitates growth opportunities and realizes cost savings. Chemical and TCF entered into the merger agreement because each believes that the merger and the other transactions contemplated by the merger agreement are fair to and in the best interests of its respective shareholders and that combining the businesses of Chemical and TCF will produce benefits and cost savings.

However, Chemical and TCF must successfully combine their respective businesses in a manner that permits these benefits to be realized. In addition, the combined company must achieve the anticipated growth and cost savings without adversely affecting current revenues and future growth. If the combined company is not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully, or at all, or may take longer to realize than expected.

An inability to realize the full extent of the anticipated benefits of the merger and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, level of expenses and operating results of the combined company, which may adversely affect the value of the common stock of the combined company after the completion of the merger.

In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. Actual growth and cost savings, if achieved, may be lower than what Chemical and TCF expect and may take longer to achieve than anticipated. If Chemical and TCF are not able to adequately address integration challenges, they may be unable to successfully integrate their operations or realize the anticipated benefits of the integration of the two companies.

The unaudited pro forma combined condensed consolidated financial information included in this joint proxy statement/prospectus is preliminary and the actual financial condition and results of operations after the merger may differ materially.

The unaudited pro forma financial information included in this joint proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what the combined company’s actual financial position or results of operations would have been had the merger been completed on the date(s) indicated. The preparation of the pro forma financial information is based upon available information and certain assumptions and estimates that Chemical and TCF currently believe are reasonable. For financial reporting purposes, TCF will be treated as the accounting acquirer, and Chemical will be treated as the accounting acquiree. The unaudited pro forma financial information reflects adjustments, which are based upon preliminary estimates, to allocate the purchase price to Chemical’s net assets. The purchase price allocation reflected in this joint proxy statement/prospectus is preliminary, and the final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of Chemical, as the accounting acquiree, as of the date of the completion of the merger. In addition, following the completion of the merger, there may be further refinements of the purchase price allocation as additional information becomes available. Accordingly, the final purchase accounting adjustments may differ materially from the pro forma adjustments reflected in this joint proxy statement/prospectus. See “Unaudited Pro Forma Combined Condensed Consolidated Financial Information” beginning on page 133.

Risks relating to Chemical’s and TCF’s respective businesses.

You should read and consider the risk factors specific to Chemical’s business that will also affect the combined company after the merger. These risks are described in the sections entitled “Risk Factors” in Chemical’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and in other documents incorporated by reference into this joint proxy statement/prospectus. You should also read and consider risk factors specific to TCF’s business that will also affect the combined company after the merger. These risks are described in the sections entitled “Risk Factors” in TCF’s Annual Report on Form 10-K for the fiscal year ended

December 31, 2018 and in other documents incorporated by reference into this joint proxy statement/prospectus. Please see “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus and “Incorporation of Certain Documents by Reference” beginning on page 163 for the location of information incorporated by reference into this joint proxy statement/prospectus.

 

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CHEMICAL SPECIAL MEETING OF SHAREHOLDERS

Date, Time and Place

The special meeting of Chemical shareholders will be held on June 7, 2019, at 10:00 a.m. local time, at the Somerset Inn, 2601 West Big Beaver Road, Troy, Michigan 48084. On or about May 7, 2019, Chemical will commence mailing this joint proxy statement/prospectus and the enclosed form of proxy to its shareholders entitled to vote at the Chemical special meeting.

Purpose of Chemical Special Meeting

At the Chemical special meeting, Chemical shareholders will be asked to vote on the following:

 

   

a proposal to approve the merger agreement, which we refer to as the Chemical merger proposal;

 

   

a proposal to approve an amendment to Chemical’s articles of incorporation to (a) increase the number of authorized shares of Chemical common stock from 135 million to 220 million, and (b) change the name of Chemical to “TCF Financial Corporation,” effective only upon consummation of the merger, which we refer to as the Chemical articles amendment proposal;

 

   

a proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to the named executive officers of Chemical that is based on or otherwise relates to the merger, which we refer to as the Chemical compensation proposal; and

 

   

a proposal to adjourn the Chemical special meeting, if necessary or appropriate, to permit further solicitation of proxies in favor of the Chemical merger proposal or Chemical articles amendment proposal, which we refer to as the Chemical adjournment proposal.

Completion of the merger is conditioned on approval of both the Chemical merger proposal and the Chemical articles amendment proposal, among other conditions.

Completion of the merger is not conditioned on the approval of the Chemical compensation proposal or the Chemical adjournment proposal.

Recommendation of the Chemical Board of Directors

The Chemical board of directors recommends that Chemical shareholders vote “FOR” the Chemical merger proposal, “FOR” the Chemical articles amendment proposal, “FOR” the Chemical compensation proposal and “FOR” the Chemical adjournment proposal. See “The Merger—Recommendation of the Chemical Board of Directors and Reasons for the Merger” beginning on page 66.

Chemical Record Date; Shareholders Entitled to Vote

The Chemical board of directors has fixed the close of business on May 1, 2019 as the record date for determining the holders of Chemical common stock entitled to receive notice of, and to vote at, the Chemical special meeting. As of the Chemical record date, there were 71,551,637 shares of Chemical common stock outstanding and entitled to vote at the Chemical special meeting held by 4,702 holders of record.

Each share of Chemical common stock outstanding on the record date of the Chemical special meeting is entitled to one vote on each proposal and any other matter coming before the Chemical special meeting.

 

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Voting by Chemical’s Directors and Executive Officers

At the close of business on the record date for the Chemical special meeting, Chemical directors and executive officers and their affiliates were entitled to vote 559,594 shares of Chemical common stock or approximately 0.78% of the shares of Chemical common stock outstanding on that date. At the close of business on the record date for the Chemical special meeting, Chemical directors were entitled to vote 408,686 shares of Chemical common stock or approximately 0.57% of the shares of Chemical common stock outstanding on that date. Chemical currently expects that its directors and executive officers will vote their shares in favor of the Chemical merger proposal, the Chemical articles amendment proposal, the Chemical compensation proposal and the Chemical adjournment proposal, although none of them has entered into any agreements obligating them to do so.

Quorum and Adjournment

No business may be transacted at the Chemical special meeting unless a quorum is present. Shareholders who hold shares representing at least a majority of the shares entitled to vote at the Chemical special meeting must be present in person or by proxy to constitute a quorum. If a quorum is not present, the chairman of the special meeting may adjourn the meeting to solicit additional proxies. In addition, if fewer shares are voted than the number of shares required to obtain the necessary Chemical shareholder approvals, then the special meeting may be adjourned to allow additional time for obtaining additional proxies, if the approval of a majority of the votes cast at the special meeting on the Chemical adjournment proposal is obtained.

No notice of an adjourned meeting need be given if the time and place of the adjourned meeting are announced at the special meeting unless, after the adjournment, a new record date is fixed for the adjourned meeting, in which case a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. At any adjourned meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned meeting.

All shares of Chemical common stock represented at the Chemical special meeting, including shares that are represented but that vote to abstain, will be treated as present for purposes of determining the presence or absence of a quorum, but broker non-votes will not be counted for the purposes of determining whether a quorum exists.

Required Vote; Treatment of Abstentions and Failure to Vote

Chemical merger proposal:

 

   

Standard: Approval of the Chemical merger proposal requires the affirmative vote of a majority of the issued and outstanding shares of Chemical common stock entitled to vote. Chemical shareholders must approve the Chemical merger proposal in order for the merger to occur. If Chemical shareholders fail to approve the Chemical merger proposal, the merger will not occur.

 

   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy card or fail to instruct your bank or broker how to vote with respect to the Chemical merger proposal, it will have the same effect as a vote “AGAINST” the proposal.

Chemical articles amendment proposal:

 

   

Standard: Approval of the Chemical articles amendment proposal requires the affirmative vote of a majority of the issued and outstanding shares of Chemical common stock entitled to vote. Chemical shareholders must approve the Chemical articles amendment proposal in order for the merger to occur. If Chemical shareholders fail to approve the Chemical articles amendment proposal, the merger will not occur.

 

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Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy card or fail to instruct your bank or broker how to vote with respect to the Chemical articles amendment proposal, it will have the same effect as a vote “AGAINST” the proposal.

Chemical compensation proposal:

 

   

Standard: Assuming a quorum is present, approval of the Chemical compensation proposal requires the affirmative vote of a majority of the votes cast at the Chemical special meeting. This is an advisory vote, and therefore is not binding on Chemical or the Chemical board of directors or the Chemical compensation committee. If Chemical shareholders fail to approve the Chemical compensation proposal, but approve the Chemical merger proposal and the Chemical articles amendment proposal, the merger may nonetheless occur.

 

   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy card or fail to instruct your bank or broker how to vote with respect to the Chemical compensation proposal, you will be deemed not to have cast a vote with respect to the proposal and it will have no effect on the proposal.

Chemical adjournment proposal:

 

   

Standard: Assuming a quorum is present, approval of the Chemical adjournment proposal requires the affirmative vote of a majority of the votes cast at the Chemical special meeting. If Chemical shareholders fail to approve the Chemical adjournment proposal, but approve the Chemical merger proposal and the Chemical articles amendment proposal, the merger may nonetheless occur.

 

   

Effect of abstentions and broker non-votes: If you fail to vote, mark “ABSTAIN” on your proxy card or fail to instruct your bank or broker how to vote with respect to the Chemical adjournment proposal, you will be deemed not to have cast a vote with respect to the proposal and it will have no effect on the proposal.

Voting on Proxies; Incomplete Proxies

If you were a record holder of Chemical common stock at the close of business on the record date of the Chemical special meeting, a proxy card is enclosed for your use. Chemical requests that you vote your shares as promptly as possible by (i) visiting the internet site listed on the Chemical proxy card, (ii) calling the toll-free number listed on the Chemical proxy card or (iii) submitting your Chemical proxy card by mail by using the provided self-addressed, stamped envelope. Information and applicable deadlines for voting through the internet or by telephone are set forth on the enclosed proxy card. When the accompanying proxy is returned properly executed, the shares of Chemical common stock represented by it will be voted at the Chemical special meeting or any adjournment or postponement of the meeting in accordance with the instructions contained in the proxy card. Your internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed and returned a proxy card.

If a proxy is returned without an indication as to how the shares of Chemical common stock represented are to be voted with regard to a particular proposal, the Chemical common stock represented by the proxy will be voted in accordance with the recommendation of the Chemical board of directors and, therefore, “FOR” the Chemical merger proposal, “FOR” the Chemical articles amendment proposal, “FOR” the Chemical compensation proposal and “FOR” the Chemical adjournment proposal.

As of the date hereof, the Chemical board of directors has no knowledge of any business that will be presented for consideration at the Chemical special meeting and that would be required to be set forth in this joint proxy statement/prospectus or the related proxy card other than the matters set forth in Chemical’s Notice of

 

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Special Meeting of Shareholders. If any other matter is properly presented at the Chemical special meeting for consideration, the persons named in the enclosed form of proxy and acting thereunder will vote in accordance with their discretion on such matter.

Your vote is important. If you were a record holder of Chemical common stock on the record date of the Chemical special meeting, please sign and return the enclosed proxy card, or vote via the internet or telephone, regardless of whether or not you plan to attend the Chemical special meeting in person. Proxies submitted through the specified internet website or by phone must be received by 11:59 P.M., Eastern Time, on June 6, 2019.

Shares Held in Street Name

If you hold shares of Chemical common stock through a stock brokerage account or a bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” The “record holder” of such shares is your broker, bank or other nominee, and not you, and you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to Chemical or by voting in person at the Chemical special meeting unless you have a “legal proxy,” which you must obtain from your broker, bank or other nominee. Please also note that brokers, banks or other nominees who hold shares of Chemical common stock on behalf of their customers may not give a proxy to Chemical to vote those shares without specific instructions from their customers.

If you are a Chemical shareholder and you do not instruct your broker, bank or other nominee on how to vote your shares, your broker, bank or other nominee may not vote your shares on any of the Chemical proposals.

Revocability of Proxies and Changes to a Chemical Shareholder’s Vote

A Chemical shareholder may revoke a proxy at any time before it is voted at the meeting by taking any of the following four actions:

 

   

timely delivering written notice of revocation to Chemical’s Corporate Secretary, William C. Collins, 235 East Main Street, Midland, Michigan 48640;

 

   

timely delivering a proxy card bearing a later date than the proxy that you wish to revoke;

 

   

timely casting a subsequent vote via telephone or the Internet, as described above; or

 

   

attending the meeting and voting in person.

Merely attending the meeting will not, by itself, revoke your proxy; you must cast a subsequent vote at the meeting using forms provided for that purpose. Your last valid vote that we receive before or at the special meeting is the vote that will be counted.

If you have instructed a broker, bank or other nominee to vote your shares of Chemical common stock, you must follow the directions you receive from your broker, bank or other nominee in order to change or revoke your vote.

Solicitation of Proxies

Chemical is soliciting proxies for the Chemical special meeting from its shareholders. In accordance with the merger agreement, Chemical will pay its own costs of soliciting proxies from its shareholders, including the cost of mailing this joint proxy statement/prospectus. In addition to solicitation of proxies by mail, proxies may be solicited by Chemical’s officers, directors and regular employees, without additional remuneration, by personal interview, telephone or other means of communication.

 

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Chemical will make arrangements with brokerage houses, custodians, nominees and fiduciaries to forward proxy solicitation materials to beneficial owners of Chemical common stock. Chemical may reimburse these brokerage houses, custodians, nominees and fiduciaries for their reasonable expenses incurred in forwarding the proxy materials.

To help assure the presence in person or by proxy of the largest number of shareholders possible, Chemical has engaged D.F. King & Co., Inc., a proxy solicitation firm, which we refer to as “D.F. King,” to solicit proxies on Chemical’s behalf. Chemical has agreed to pay D.F. King a proxy solicitation fee of approximately $13,500 plus certain expenses.

Attending the Chemical Special Meeting

Only Chemical shareholders, their duly appointed proxies and invited guests may attend the meeting. All attendees must present government-issued photo identification (such as a driver’s license or passport) for admittance. The additional items, if any, that attendees must bring depend on whether they are shareholders of record, beneficial owners, or proxy holders.

A Chemical shareholder who holds shares directly registered in such shareholder’s name with Chemical’s transfer agent, Computershare, and who wishes to attend the special meeting in person should bring government-issued photo identification.

A shareholder who holds shares in “street name” through a broker, bank, trustee or other nominee, such shareholder referred to in this joint proxy statement/prospectus as a beneficial owner, and who wishes to attend the special meeting in person must bring proof of beneficial ownership as of the record date, such as a letter from the broker, bank, trustee or other nominee that is the record owner of such beneficial owner’s shares, a brokerage account statement or the voting instruction form provided by the broker.

A person who holds a validly executed proxy entitling such person to vote on behalf of a record owner of Chemical common stock and who wishes to attend the special meeting in person must bring the validly executed proxy naming such person as the proxy holder, signed by the Chemical shareholder, and proof of the signing shareholder’s record ownership as of the record date.

No cameras, recording equipment or other electronic devices will be allowed in the meeting room. Failure to provide the requested documents at the door or failure to comply with the procedures for the special meeting may prevent shareholders from being admitted to the Chemical special meeting.

 

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CHEMICAL PROPOSALS

Chemical Proposal 1 – Approval of the Merger Agreement

At the Chemical special meeting, the Chemical shareholders will be asked to approve the merger agreement. Holders of Chemical common stock should read this joint proxy statement/prospectus carefully and in its entirety, including the annexes, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A. Approval of this proposal is a condition to the closing of the merger.

After careful consideration, the Chemical board of directors unanimously adopted the merger agreement, authorized and approved the merger and the transactions contemplated by the merger agreement and determined the merger agreement and the merger to be advisable and in the best interests of Chemical and its shareholders.

The Chemical board of directors unanimously recommends that Chemical shareholders vote “FOR” the Chemical merger proposal.

Chemical Proposal 2 – Approval of the Amendment to Chemical’s Articles of Incorporation

At the Chemical special meeting, Chemical shareholders will be asked to approve a proposal to amend Chemical’s articles of incorporation to:

 

   

increase the number of authorized shares of Chemical common stock from 135,000,000 to 220,000,000; and

 

   

change the name of Chemical to “TCF Financial Corporation,” effective only upon consummation of the merger.

A copy of the proposed amendment to Chemical’s articles of incorporation is attached to this joint proxy statement/prospectus as Exhibit 2 to Annex A. Approval of this proposal is a condition to the closing of the merger.

As of the Chemical record date, Chemical had 71,551,637 shares of Chemical common stock issued and outstanding and 2,768,122 shares of common stock reserved for issuance to directors and employees under various equity compensation plans, with the remaining 60,680,241 shares being authorized, unissued and unreserved shares available for other corporate purposes. In connection with the merger, Chemical expects to issue approximately 83.4 million shares of Chemical common stock to TCF common shareholders. In addition, upon completion of the merger, Chemical would reserve for issuance approximately 2.4 million additional shares of Chemical common stock to cover, among other things, stock options, restricted stock, and other share-based awards assumed under the TCF equity plans.

Without this approval, Chemical has determined that it will not have a sufficient number of authorized shares to complete the merger. Based on current estimates, if the proposal is approved, Chemical will have approximately 65.0 million authorized but unissued shares of common stock available after completion of the merger. The Chemical board of directors considers the proposed increase in the number of authorized shares desirable because it will enable Chemical to complete the merger and it will provide greater flexibility in the capital structure of the combined company, following the merger, by allowing it to raise capital that may be necessary to further develop its business, to fund potential acquisitions, to have shares available for use in connection with equity plans, and to pursue other corporate purposes that may be identified by the Chemical board of directors in the future.

 

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Each share of common stock authorized for issuance has the same rights as, and is identical in all respects with, each other share of common stock. The newly authorized shares of common stock will not affect the rights, such as voting and liquidation rights, of the shares of Chemical common stock currently outstanding. Under the Chemical articles of incorporation, Chemical’s shareholders do not have pre-emptive rights. Therefore, should the Chemical board of directors elect to issue additional shares of common stock, existing common shareholders would not have any preferential rights to purchase those shares, and such issuance could have a dilutive effect on earnings per share, book value per share, and the voting power and shareholdings of current shareholders, depending on the particular circumstances in which the additional shares of common stock are issued. Other than in connection with the merger and pursuant to the Chemical equity compensation plans, Chemical does not have any current plans to issue shares of common stock at this time.

In addition, under the merger agreement, Chemical will change its name to TCF Financial Corporation upon completion of the merger.

The amendment to the Chemical articles of incorporation will become effective at the effective time of the merger. However, at any time prior to the effectiveness of the filing of the articles amendment with the Michigan Department of Licensing and Regulatory Affairs, the Chemical board of directors may abandon the articles amendment without further action of the Chemical shareholders, notwithstanding prior authorization of the Chemical articles amendment proposal by the Chemical shareholders.

The foregoing description of the amendment to the Chemical articles of incorporation does not purport to be complete and is qualified in its entirety by reference to the full text of the amendment, which is attached to this joint proxy statement/prospectus as Exhibit 2 to Annex A.

The Chemical board of directors unanimously recommends that Chemical shareholders vote “FOR” the Chemical articles amendment proposal.

Chemical Proposal 3 – Chemical Compensation Proposal

Section 14A of the Exchange Act and Rule 14a-21(c) under the Exchange Act require that Chemical seek a nonbinding advisory vote from its shareholders to approve the “golden parachute” compensation that its named executive officers will receive in connection with the merger discussed in “The Merger—Interests of Chemical Directors and Executive Officers in the Merger” and “The Merger—Merger-Related Compensation for Chemical’s Named Executive Officers” beginning on page 98. As required by these provisions, Chemical is asking the Chemical shareholders to vote on the adoption of the following resolution:

“RESOLVED, that the compensation that may be paid or become payable to Chemical’s named executive officers in connection with the merger, and the agreements or understandings pursuant to which such compensation may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in “The Merger—Merger-Related Compensation for Chemical’s Named Executive Officers,” are hereby APPROVED.”

The vote with respect to this proposal is an advisory vote and will not be binding on Chemical, TCF or the combined company. Therefore, regardless of whether Chemical shareholders approve this proposal, if the Chemical merger proposal is approved by Chemical shareholders and the Chemical articles amendment proposal is approved by Chemical shareholders and the merger is completed, the “golden parachute” compensation may still be paid to such named executive officers to the extent payable in accordance with the terms of such compensation agreements and arrangements. Approval of this proposal is not a condition to the closing of the merger.

The Chemical board of directors unanimously recommends that Chemical shareholders vote “FOR” approval of the Chemical compensation proposal.

 

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Chemical Proposal 4 – Chemical Adjournment Proposal

The Chemical special meeting may be adjourned to another time or place if there are insufficient votes represented at the Chemical special meeting to constitute a quorum necessary to conduct business at the Chemical special meeting or if there are insufficient votes necessary to obtain the approval of Proposals 1 and 2, above.

Chemical requests that its shareholders authorize the holder of any proxy solicited by the Chemical board of directors on a discretionary basis to vote in favor of adjourning the Chemical special meeting to another time or place, if determined necessary or appropriate by Chemical, to solicit additional proxies (including the solicitation of proxies from Chemical shareholders who have previously voted). Approval of this proposal is not a condition to the closing of the merger.

The Chemical board of directors unanimously recommends that Chemical shareholders vote “FOR” approval of the Chemical adjournment proposal.

 

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TCF SPECIAL MEETING OF SHAREHOLDERS

Date, Time and Place

The special meeting of TCF shareholders will be held on June 7, 2019 at 9:00 a.m. local time, at the TCF Minnetonka office, 11100 Wayzata Boulevard, Minnetonka, Minnesota 55305. On or about May 7, 2019, TCF commenced mailing this joint proxy statement/prospectus and the enclosed form of proxy to its shareholders entitled to vote at the TCF special meeting.

Purpose of the TCF Special Meeting

At the TCF special meeting, TCF shareholders will be asked to vote on the following:

 

   

a proposal to adopt the merger agreement, which we refer to as the TCF merger proposal;

 

   

a proposal to approve, on an non-binding advisory basis, certain compensation that may be paid or become payable to the named executive officers of TCF that is based on or otherwise relates to the merger, which we refer to as the TCF compensation proposal; and

 

   

a proposal to approve of the adjournment of the TCF special meeting to a later date or dates, if necessary or appropriate, for the purpose of soliciting additional votes for the approval of the TCF merger proposal, which we refer to as the TCF adjournment proposal.

Completion of the merger is conditioned on approval of the TCF merger proposal, among other conditions.

Completion of the merger is not conditioned on the approval of the TCF compensation proposal or the TCF adjournment proposal.

Recommendation of the TCF Board of Directors

The TCF board of directors unanimously recommends that TCF shareholders vote “ FOR ” the TCF merger proposal, “ FOR ” the TCF compensation proposal and “ FOR ” the TCF adjournment proposal. See “The Merger—Recommendation of the TCF Board of Directors and Reasons for the Merger” beginning on page 69.

TCF Record Date and Quorum

The TCF board of directors has fixed the close of business on April 30, 2019 as the record date for determining the holders of TCF common stock entitled to receive notice of, and to vote at, the TCF special meeting. As of the TCF record date, there were 164,186,454 shares of TCF common stock outstanding and entitled to vote at the TCF special meeting held by 5,072 holders of record.

To transact business at the TCF special meeting, the presence, in person or represented by proxy, of at least a majority of the total number of outstanding shares of TCF common stock entitled to vote at the TCF special meeting is necessary in order to constitute a quorum for purposes of the matters being voted on at the TCF special meeting. Abstentions will be treated as present at the TCF special meeting for purposes of determining the presence or absence of a quorum, but broker non-votes will not be counted for the purposes of determining whether a quorum exists. In the event that a quorum is not present at the TCF special meeting, the holders of a majority of the voting shares represented at the TCF special meeting, in person or by proxy, may adjourn the meeting from time to time to another time and/or place until a quorum is so present or represented.

TCF Voting Rights

Each share of TCF common stock entitles the holder thereof to one vote on each proposal to be considered at the TCF special meeting.

 

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Required Vote

Approval of the TCF merger proposal requires the affirmative vote of a majority of the outstanding shares of TCF common stock entitled to vote thereon. Assuming a quorum is present, approval of the TCF compensation proposal and TCF adjournment proposal requires the affirmative vote of a majority of shares of TCF common stock represented at the TCF special meeting, in person or by proxy, that are entitled to vote.

Voting by TCF’s Directors and Executive Officers

As of the TCF record date, directors and executive officers of TCF and their affiliates owned and were entitled to vote 3,786,390 shares of TCF common stock, representing approximately 2.3% of the shares of TCF common stock outstanding on that date. TCF currently expects that its directors and executive officers will vote their shares in favor of the TCF merger proposal, the TCF compensation proposal and the TCF adjournment proposal, although none of them has entered into any agreements obligating them to do so.

Treatment of Abstentions; Failure to Vote

For purposes of the TCF special meeting, an abstention occurs when a TCF shareholder attends the TCF special meeting, either in person or by proxy, but abstains from voting or marks abstain on such shareholder’s proxy card.

 

   

For the TCF merger proposal, an abstention or failure to vote, either in person or by proxy, at the TCF special meeting will have the same effect as a vote “AGAINST” such proposal.

 

   

For the TCF compensation proposal and the TCF adjournment proposal, failure to vote, either in person or by proxy, at the TCF special meeting will have will have no effect on the proposal. For each of these proposals, abstentions are deemed present for the purposes of establishing a quorum and will have the same effect as a vote “AGAINST” such proposal.

Voting on Proxies; Incomplete Proxies

Giving a proxy means that a TCF shareholder authorizes the persons named in the enclosed proxy card to vote its shares of TCF common stock at the TCF special meeting in the manner such shareholder directs. A TCF shareholder may vote by proxy or in person at the TCF special meeting. If you hold your shares of TCF common stock in your name as a shareholder of record, to submit a proxy, you, as a TCF shareholder, may use one of the following methods:

 

   

By mail: Mark, sign and date your proxy card and return it in the postage paid envelope we have provided.

 

   

By telephone: Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on June 6, 2019. Have your proxy card available when you call and then follow the instructions.

 

   

Via the Internet: Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on June 6, 2019. Have your proxy card available when you access the website www.proxyvote.com and follow the instructions to obtain your records and to create an electronic voting instruction form.

When the accompanying proxy is returned properly executed prior to the TCF special meeting, the shares of TCF common stock represented by it will be voted at the TCF special meeting in accordance with the instructions contained on the proxy card. If any proxy is returned without indication as to how to vote, the shares of TCF common stock represented by the proxy will be voted as recommended by the TCF board of directors.

 

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If a TCF shareholder’s shares of TCF common stock are held in “street name” by a broker, bank or other nominee, the TCF shareholder should check the voting form used by that firm to determine whether it may vote by telephone or via the Internet.

Your vote is very important, regardless of the number of shares of TCF common stock you own. Accordingly, each TCF shareholder should complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope, or vote via the Internet or by telephone as soon as possible, whether or not you plan to attend the TCF special meeting in person.

Shares Held in Street Name

If you are a TCF shareholder and your shares of TCF common stock are held in “street name” through a broker, bank or other nominee, your broker, bank or other nominee’s ability to vote your shares of TCF common stock for you is governed by the rules of the NYSE. Without your specific instruction, a broker, bank or other nominee may only vote your shares of TCF common stock on routine proposals. As such, your broker, bank or other nominee will submit a proxy card on your behalf as to routine proposals but leave your shares of TCF common stock unvoted on non-routine proposals—this is known as a “broker non-vote.” The TCF merger proposal, the TCF compensation proposal and the TCF adjournment proposal are regarded as non-routine matters and your broker, bank or other nominee will not vote on these matters without instructions from you. Therefore, if you are a TCF shareholder holding your shares of TCF common stock in “street name” and you do not instruct your broker, bank or other nominee on how to vote, your shares of TCF common stock will have the same effect as a vote “AGAINST” the TCF merger proposal and will have no effect on the TCF compensation proposal or the TCF adjournment proposal.

Revocability of Proxies and Changes to a TCF Shareholder’s Vote

If you are the owner of record of your shares and have submitted your proxy and would like to revoke it, you may do so before your shares of TCF common stock are voted at the TCF special meeting by taking any of the following actions:

 

   

delivering a written notice bearing a date later than the date of your proxy to the secretary of TCF stating that you revoke your proxy, which notice must be received by TCF prior to the beginning the TCF special meeting;

 

   

completing, signing, dating and returning to the secretary of TCF a new proxy card relating to the same shares of TCF common stock and bearing a later date, which new proxy card must be received by TCF prior to the beginning of the TCF special meeting;

 

   

casting a new vote by telephone or via the Internet at any time before 11:59 p.m. Eastern Time on the day before the TCF special meeting; or

 

   

attending the TCF special meeting and voting in person, although attendance at the TCF special meeting will not, by itself, revoke a proxy.

If you choose to send a written notice of revocation or to mail a new proxy to TCF, you must submit your notice of revocation or your new proxy to TCF Financial Corporation, Attention: Corporate Secretary at TCF Financial Corporation, 200 Lake Street East, Mail Code EXO-01-G, Wayzata, MN 55391-1693, and it must be received at any time before the vote is taken at the TCF special meeting.

If you have instructed a broker, bank or other nominee to vote your shares of TCF common stock, you must follow the directions you receive from your broker, bank or other nominee in order to change or revoke your vote.

 

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TCF shareholders retain the right to revoke their proxies in the manner described above. Unless so revoked, the shares of TCF common stock represented by such proxies will be voted at the TCF special meeting and all adjournments or postponements thereof.

Solicitation of Proxies

The cost of solicitation of proxies for the TCF special meeting will be borne by TCF. TCF will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy materials to the beneficial owners of common stock. TCF has retained Georgeson LLC to assist in the solicitation of proxies for a fee of approximately $12,500 plus related fees for any additional services and reasonable out-of-pocket expenses. In addition, TCF’s directors, officers and employees may also solicit proxies by mail, telephone, facsimile, electronic mail or in person, but no additional compensation will be paid to them.

Attending the TCF Special Meeting

All TCF shareholders of record as of the record date, or their duly appointed proxies, may attend the TCF special meeting. If you plan to attend the TCF special meeting, you must hold your shares of TCF common stock in your own name or have a letter from the record holder of your shares confirming your ownership. In addition, you must bring a form of personal photo identification with you in order to be admitted to the TCF special meeting, together with the admission ticket attached to the top half of your proxy card. TCF reserves the right to refuse admittance to anyone without proper proof of stock ownership or without proper photo identification.

If your shares of TCF common stock are held in “street name” by a bank, broker or other nominee and you wish to attend the TCF special meeting, please bring evidence of your beneficial ownership of your shares (e.g., a copy of a recent brokerage statement showing the shares) in addition to your valid photo identification. If you intend to vote in person at the TCF special meeting and you own your shares in “street name,” you also are required to bring to the TCF special meeting a legal proxy, executed in your favor, from the record holder of your shares, such as a broker, bank or other nominee.

 

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TCF PROPOSALS

TCF Proposal 1 – Adoption of the Merger Agreement

As discussed elsewhere in this joint proxy statement/prospectus, TCF shareholders will consider and vote on the TCF merger proposal. TCF shareholders must approve the TCF merger proposal in order for the merger to occur. If TCF shareholders fail to approve the TCF merger proposal, the merger will not occur.

Accordingly, TCF is asking TCF shareholders to vote to approve the TCF merger proposal, either by attending the TCF special meeting and voting in person or by submitting a proxy. You should carefully read this joint proxy statement/prospectus in its entirety for more detailed information concerning the merger agreement and the transactions contemplated thereby. In particular, you are urged to read the merger agreement in its entirety, which is attached as Annex A hereto.

The TCF board of directors unanimously recommends that TCF shareholders vote “FOR” the TCF merger proposal.

TCF Proposal 2 – TCF Compensation Proposal

Pursuant to the Dodd-Frank Act and Rule 14a-21(c) of the Exchange Act, TCF is seeking non-binding, advisory shareholder approval of the compensation of TCF’s named executive officers that is based on or otherwise relates to the merger as disclosed in “The Merger—Interests of TCF Directors and Executive Officers in the Merger” and “The Merger—Merger-Related Compensation for TCF’s Named Executive Officers” beginning on page 103. The proposal gives TCF’s shareholders the opportunity to express their views on the merger-related compensation of TCF’s named executive officers. Accordingly, TCF is requesting shareholders to adopt the following resolution, on a non-binding, advisory basis:

“RESOLVED, that the compensation that may be paid or become payable to TCF’s named executive officers in connection with the merger, and the agreements or understandings pursuant to which such compensation may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in “The Merger— Merger-Related Compensation for TCF’s Named Executive Officers,” are hereby APPROVED on a non-binding, advisory basis.”

The vote on this proposal is a vote separate and apart from the vote of the TCF shareholders to approve the TCF merger proposal, and approval of this TCF compensation proposal is not a condition to completion of the merger. Accordingly, a holder of TCF common stock may vote against this TCF compensation proposal and vote to approve the TCF merger proposal or vice versa. The vote with respect to this TCF compensation proposal is advisory only and will not be binding on TCF or Chemical, regardless of whether the other proposals are approved. If the merger is completed, the merger-related compensation may be paid to TCF’s named executive officers to the extent payable in accordance with the terms of the compensation agreements and arrangements even if TCF’s shareholders fail to approve the TCF compensation proposal.

The TCF board of directors unanimously recommends that TCF shareholders vote “FOR” the TCF compensation proposal.

TCF Proposal 3 – TCF Adjournment Proposal

The TCF special meeting may be adjourned to another time or place, if necessary or appropriate, to permit further solicitation of proxies in favor of the TCF merger proposal.

If, at the TCF special meeting, the number of shares of TCF common stock present in person or represented by proxy and voting in favor of the TCF merger proposal is insufficient to approve the TCF merger proposal, TCF may move to adjourn the TCF special meeting in order to enable the TCF board of directors to solicit additional proxies in favor of the TCF merger proposal.

 

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In the TCF adjournment proposal, TCF is asking its shareholders to authorize the holder of any proxy solicited by the TCF board of directors to vote in favor of granting discretionary authority to the proxy holders, and each of them individually, to adjourn the TCF special meeting to another time and/or place for the purpose of soliciting additional proxies. If the TCF shareholders approve the TCF adjournment proposal, TCF could adjourn the TCF special meeting and any adjourned session of the TCF special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from TCF shareholders who have previously voted. TCF does not intend to call a vote on adjournment of the special meeting to solicit additional proxies if the TCF merger proposal is adopted at the TCF special meeting.

The TCF board of directors unanimously recommends that TCF shareholders vote “FOR” the TCF adjournment proposal.

 

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THE PARTIES

Chemical Financial Corporation

333 W. Fort Street, Suite 1800

Detroit, Michigan 48226

(800) 867-9757

Chemical Financial Corporation is a financial holding company headquartered in Detroit, Michigan, that was incorporated in the State of Michigan in August 1973. Chemical relocated our headquarters from Midland, Michigan to Detroit, Michigan effective July 25, 2018. Chemical is the largest banking company headquartered and operating branch offices in Michigan. Chemical’s common stock is listed on NASDAQ under the symbol “CHFC.” On June 30, 1974, Chemical acquired Chemical Bank and Trust Company pursuant to a reorganization in which the former shareholders of Chemical Bank and Trust Company became shareholders of Chemical. Chemical changed the name of Chemical Bank and Trust Company to Chemical Bank on December 31, 2005. As of December 31, 2018, Chemical had total consolidated assets of $21.5 billion, total loans of $15.3 billion, total deposits of $15.6 billion and total shareholders’ equity of $2.8 billion. Chemical operates through a single subsidiary bank, Chemical Bank. As of December 31, 2018, Chemical Bank had 212 banking offices located in Michigan, Ohio and northern Indiana.

Since Chemical’s acquisition of Chemical Bank and Trust Company, Chemical has acquired 25 community banks and 36 other branch bank offices through December 31, 2018. Chemical’s most recent transactions include the merger with Talmer Bancorp, Inc. during the third quarter of 2016, and the acquisitions of Lake Michigan Financial Corporation and Monarch Community Bancorp, Inc. during the second quarter of 2015.

Chemical’s business is concentrated in a single industry segment, commercial banking, which is conducted through our single commercial bank subsidiary, Chemical Bank. Chemical offers a full range of traditional banking and fiduciary products and services to residents and business customers in our geographical market areas. These products and services include business and personal checking accounts, savings and individual retirement accounts, time deposit instruments, electronically accessed banking products, residential and commercial real estate financing, commercial lending, consumer financing, debit cards, safe deposit box services, money transfer services, automated teller machines, access to insurance and investment products, corporate and personal wealth management services, mortgage banking and other banking services.

More information about Chemical is available by visiting the “Investor Information” tab of its website at www.chemicalbank.com. Information contained on Chemical’s website does not constitute part of, and is not incorporated into, this joint proxy statement/prospectus. For a complete description of Chemical’s business, financial condition, results of operations and other important information, please refer to Chemical’s filings with the SEC that are incorporated by reference in this document, including its Annual Report on Form 10-K for the year ended December 31, 2018. For instructions on how to find copies of these documents, see “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus.

TCF Financial Corporation

200 Lake Street East, EXO-01-G

Wayzata, Minnesota 55391-1693

(952) 745-2760

TCF Financial Corporation is a national bank holding company, headquartered in Wayzata, Minnesota. Through its wholly-owned subsidiary TCF National Bank, TCF operated 314 bank branches in Illinois, Minnesota, Michigan, Colorado, Wisconsin, Arizona and South Dakota as of December 31, 2018. TCF provides a full range of consumer-facing and commercial services, including consumer banking services in 47 states, commercial banking services in 42 states, commercial leasing and equipment financing in all 50 states and, to a limited extent, in foreign countries and commercial inventory financing in all 50 states and Canada and, to a limited extent, in other foreign countries.

 

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TCF was incorporated under the laws of the State of Delaware in 1987 and at December 31, 2018, had total assets of $23.7 billion, total deposits of $18.9 billion and over 5,500 employees.

More information about TCF is available by visiting the “About TCF” tab of its website at www.tcfbank.com. Information contained on TCF’s website does not constitute part of, and is not incorporated into, this joint proxy statement/prospectus. For a complete description of TCF’s business, financial condition, results of operations and other important information, please refer to TCF’s filings with the SEC that are incorporated by reference in this document, including its Annual Report on Form 10-K for the year ended December 31, 2018. For instructions on how to find copies of these documents, see “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus.

 

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THE MERGER

The following is a discussion of the merger and the material terms of the merger agreement between Chemical and TCF. You are urged to read carefully the merger agreement in its entirety, a copy of which is attached as Annex A to this joint proxy statement/prospectus and incorporated by reference herein. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. This section is not intended to provide you with any factual information about Chemical or TCF. Such information can be found elsewhere in this joint proxy statement/prospectus and in the public filings Chemical and TCF make with the SEC. See “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus and “Incorporation of Certain Documents by Reference” beginning on page 163.

Terms of the Merger

On January 27, 2019, the Chemical board of directors and the TCF board of directors each unanimously approved the merger agreement and the transactions contemplated thereby including, in the case of the Chemical board of directors, the issuance of Chemical common stock and Chemical Series C preferred stock (and related depositary shares) in connection with the merger. Under the merger agreement, TCF will merge with and into Chemical, with Chemical as the surviving corporation. Immediately following the merger or at such later time as the parties may mutually agree, Chemical’s wholly-owned subsidiary, Chemical Bank, a Michigan banking corporation will merge with and into TCF’s wholly-owned subsidiary, TCF National Bank, a national banking association, with TCF National Bank as the surviving bank.

Merger Consideration

Each outstanding share of TCF common stock, except for shares of TCF common stock owned by TCF as treasury stock or shares of common stock owned by TCF or Chemical, in each case, other than in a fiduciary or agency capacity or as a result of debts previously contracted (which will be cancelled), will be automatically converted into the merger consideration of 0.5081 shares of Chemical common stock.

In addition, each share of TCF’s outstanding 5.70% Series C Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, and each related depositary share, will be converted into the right to receive, without interest, one share of Chemical’s 5.70% Series C Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, with equivalent rights and preferences, or one depositary share, respectively.

Treatment of TCF Equity Awards

At the effective time of the merger, each TCF equity award outstanding immediately prior to the effective time will be adjusted so that its holder will be entitled to receive a number of shares of Chemical common stock (i) equal to the product of (a) the number of shares of TCF common stock subject to such TCF equity award, as applicable, immediately prior to the effective time multiplied by (b) the exchange ratio and (ii) rounded, as applicable, to the nearest whole share, and shall otherwise remain subject to the same terms and conditions (including, without limitation, with respect to vesting conditions (taking into account any vesting upon the occurrence of the effective time that is applicable to the TCF equity awards granted to TCF’s non-employee directors) and cash dividend equivalent rights). All TCF equity awards held by an employee whose employment will continue with the combined company or its subsidiaries after the merger will vest in their entirety to the extent such employee’s employment is terminated by the surviving corporation without cause or by the employee for good reason prior to the second anniversary of the effective time of the merger. For any TCF equity awards that are subject to performance-based vesting, the number of shares of TCF common stock underlying such award will be calculated and fixed as of the effective time of the merger assuming achievement of the applicable performance conditions at the greater of target level performance and the actual level of achievement of such conditions based on TCF’s performance results through the latest practicable date prior to the effective time of

 

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the merger, and such awards will convert into service-based vesting awards with the applicable vesting date to be the last day of the original performance period. For purposes of TCF equity awards for which performance is achievable at a single level, the performance condition will be no longer relevant as of the effective time of the merger.

Conversion of Shares; Exchange and Payment Procedures

At or prior to the effective time of the merger, Chemical will deposit or cause to be deposited with an exchange agent designated by Chemical and reasonably acceptable to TCF, for the benefit of the holders of shares of TCF common stock, sufficient cash, shares of Chemical common stock, and shares of Chemical Series C preferred stock and related depositary shares to be exchanged in accordance with the merger agreement, including the merger consideration and payment of cash in lieu of fractional shares in the case of TCF common stock.

The conversion of TCF common stock into the right to receive the merger consideration and the conversion of TCF preferred stock and related depositary shares into the right to receive Chemical Series C preferred stock and related depositary shares will occur automatically at the effective time of the merger. As promptly as practicable after the effective time of the merger, the exchange agent (i) will exchange certificates or book entry shares representing shares of TCF common stock for merger consideration and (ii) will exchange certificates representing the shares of TCF preferred stock for shares of Chemical Series C preferred stock to be received in the merger pursuant to the terms of the merger agreement.

Letters of Transmittal

As promptly as practicable after the effective time of the merger, but in no event later than five business days thereafter, the exchange agent will mail to each holder of record of (i) TCF common stock immediately prior to the effective time of the merger that has been converted at the effective time of the merger into the right to receive the merger consideration and (ii) TCF Series C preferred stock immediately prior to the effective time of the merger that has been converted at the effective time of the merger into the right to receive Chemical Series C preferred stock, a letter of transmittal and instructions. The letter of transmittal and instructions to TCF common shareholders will explain how to surrender shares of TCF common stock in exchange for the merger consideration and cash in lieu of fractional shares such holder is entitled to receive under the merger agreement. Additionally, the letter of transmittal and instructions to TCF Series C preferred shareholders will explain how to surrender shares of TCF Series C preferred stock in exchange for Chemical Series C preferred stock. TCF shareholders who properly surrender their certificates or book entry shares to the exchange agent, together with a properly completed and duly executed letter of transmittal, and such other documents as may be required pursuant to such instructions, will receive for each share of TCF common stock, 0.5081 shares of Chemical common stock plus any cash payable in lieu of any fractional shares of Chemical common stock, and any dividends or distributions such holder has the right to receive pursuant to the merger agreement or will receive for each share of TCF Series C preferred stock, a share of Chemical Series C preferred stock, and any unpaid dividends or distributions on the Chemical Series C preferred stock. No interest will be paid or accrue on any merger consideration or cash in lieu of fractional shares.

After completion of the merger, there will be no further transfers on the stock transfer books of TCF of shares of TCF common stock or TCF Series C preferred stock that were issued and outstanding immediately prior to the effective time of the merger. If certificates representing shares of TCF common stock or book entry shares are presented for transfer after the effective time of the merger, they will be cancelled and exchanged for the merger consideration into which the shares of TCF common stock represented by that certificate or book entry share have been converted. If certificates representing shares of TCF Series C preferred stock are presented for transfer after the effective time of the merger, they will be cancelled and exchanged for shares of Chemical Series C preferred stock into which the shares of TCF Series C preferred stock represented by that certificate have been converted.

 

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Dividends and Distributions

No dividends or other distributions declared with respect to Chemical common stock or Chemical Series C preferred stock will be paid to the holder of any unsurrendered certificates or book entry shares of such capital stock until the holder surrenders such certificate or book entry share in accordance with the merger agreement. After the surrender of a certificate or book entry share in accordance with the merger agreement, the record holder thereof will be entitled to receive any such dividends or other distributions, without any interest, which had previously become payable with respect to the whole shares of Chemical common stock or Chemical Series C preferred stock, as applicable, that the shares of TCF common stock or TCF Series C preferred stock, as applicable, represented by such certificate or book entry share have been converted into the right to receive under the merger agreement.

Fractional Shares

Chemical will not issue any fractional shares of Chemical common stock in the merger. Instead, a TCF shareholder who otherwise would have received a fraction of a share of Chemical common stock will receive an amount in cash (rounded to the nearest cent) determined by multiplying (i) the average of the closing-sale prices of Chemical common stock for the five full trading days ending on the day prior to the effective time of the merger by (ii) the fraction of a share (rounded to the nearest thousandth when expressed in decimal form) of Chemical common stock to which such shareholder would otherwise be entitled to receive.

Withholding

Each of Chemical and the exchange agent will be entitled to deduct and withhold from any consideration otherwise payable pursuant to the merger agreement such amounts they are required to deduct and withhold under the Code or any provision of state, local, or foreign tax law. If any such amounts are withheld and paid over to the appropriate governmental authority, these amounts will be treated for all purposes of the merger agreement as having been paid to the person in respect of which the deduction and withholding was made.

Dissenting Shares

Under the DGCL, TCF shareholders will not have any appraisal rights with respect to the merger.

Under the MBCA, Chemical shareholders will not have any appraisal rights or dissenters’ rights with respect to the merger.

Lost, Stolen or Destroyed Stock Certificates

If a certificate for TCF common stock or TCF Series C preferred stock (or related depositary shares) has been lost, stolen or destroyed, the exchange agent will issue the appropriate consideration properly payable under the merger agreement upon receipt of (i) an affidavit of that fact by the claimant and (ii) if required by Chemical, the posting of a bond in an amount as Chemical may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such certificate.

Background of the Merger

Each of Chemical’s and TCF’s boards of directors and senior management have from time to time separately engaged in reviews and discussions of long-term strategies and objectives and have considered ways to enhance their respective companies’ performance and prospects in light of competitive, regulatory and other relevant developments, all with the goal of increasing long-term value for their respective shareholders. For each of Chemical and TCF, these reviews have included periodic discussions with respect to potential transactions that would further its strategic objectives and the potential benefits and risks of any such transactions.

 

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As part of their respective strategic reviews and discussions, each of Chemical and TCF has considered a number of factors, including that additional scale and capital may be required for continued growth and increased profitability of their respective businesses, potential opportunities for organic and inorganic growth, the regulatory environment, trends in interest rates, the competitive landscape for financial institutions and other economic factors.

David Provost, Chemical’s President and Chief Executive Officer, and Craig Dahl, TCF’s Chairman, President and Chief Executive Officer, have periodically discussed trends in the financial services industry and their respective institutions generally. These discussions occurred during impromptu meetings at investor and banking industry conferences and social settings. Prior to May 2018, none of these discussions included substantive discussions regarding a potential business combination between Chemical and TCF.

On May 11, 2018, Mr. Dahl contacted Mr. Provost to discuss, in general terms, their respective companies, the financial services industry sectors in which they operate, general financial services industry trends and strategic developments, and business combination trends and opportunities in the banking industry. Messrs. Provost and Dahl further discussed these matters during an in-person meeting in Detroit, Michigan on May 21, 2018.

On May 24, 2018, Chemical and TCF entered into a confidentiality agreement in order to facilitate more detailed discussions of a potential business combination and reciprocal due diligence efforts.

Shortly thereafter, Mr. Dahl briefed Vance Opperman, the lead director of the TCF board of directors, on the discussions Mr. Dahl had had with Mr. Provost and the potential benefits of a potential business combination with Chemical. Mr. Dahl and Mr. Opperman discussed these matters and possible steps for exploring a potential transaction.

On June 18, 2018, the Chemical board of directors held a meeting at which members of Chemical management provided a general overview of TCF and its businesses and discussed the status of exploratory discussions with TCF with respect to a potential business combination. The Chemical board of directors reconfirmed the members of its strategic initiatives committee, which was composed of six independent directors of Chemical. The Chemical board of directors had previously formed the strategic initiatives committee to assist the Chemical board of directors with oversight responsibility with respect to strategic opportunities and assist Chemical management with respect to the evaluation of strategic opportunities. At the meeting, the Chemical board of directors authorized Chemical management to continue discussions with TCF with respect to a potential business combination transaction.

On June 19, 2018, Gary Torgow, the executive Chairman of the board of directors of Chemical, Mr. Provost and Mr. Dahl met in Detroit, Michigan and further discussed their respective companies, the financial services industry sectors in which they operate, general financial services industry trends and strategic developments, and the possibility of a strategic combination between Chemical and TCF.

On June 25, 2018, members of Chemical and TCF management met in Chicago, Illinois, and discussed their respective businesses and the possibility of a business combination.

On June 26, 2018, the Chemical board of directors held a meeting, which was attended by members of Chemical management and representatives of KBW, Chemical’s financial advisor. Chemical management updated the board with regard to the meeting with TCF management that occurred the previous day. Chemical’s management discussed the potential for a business combination with TCF to diversify Chemical’s and TCF’s respective balance sheets and revenue streams, provide greater scale to support investments in technology and accelerate efficiencies, and enhance shareholder value. Members of Chemical management noted that continuing discussions between the parties would focus on potential synergies, integration and management of complementary business lines. Representatives of KBW discussed with the Chemical board of directors a general overview of TCF and preliminary financial considerations with respect to a potential merger with TCF.

 

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At a banking industry conference on June 28 and 29, 2018, Thomas C. Shafer, President and Chief Executive Officer of Chemical Bank, and Mr. Dahl met. In addition to discussing banking industry trends, Messrs. Dahl and Shafer shared information about Chemical’s and TCF’s respective histories, markets, business lines and management backgrounds.

On July 12, 2018, Messrs. Provost, Torgow and Dahl met in Minneapolis, Minnesota and discussed the potential benefits of a merger to their respective companies and shareholders, as well as the potential board composition, management structure, the name of the potential combined company, and the locations of its headquarters and key operations centers.

After this meeting, Mr. Dahl updated the lead director of the TCF board of directors on the discussions that had occurred, including TCF management’s preliminary assessments of the potential financial and strategic benefits of a transaction and initial discussions on possible corporate structure and organization.

In early September 2018, Chemical, with assistance from KBW and Nelson Mullins Riley & Scarborough, LLP, legal counsel to Chemical, which we refer to as Nelson Mullins, prepared a draft non-binding term sheet with respect to a potential merger of equals transaction between Chemical and TCF. The draft term sheet provided for, among other things, the merger of TCF into Chemical, with Chemical as the surviving entity, a conversion of ten percent of TCF’s common stock into cash at an unspecified per-share amount, and a conversion of ninety percent of TCF’s common stock into Chemical common stock based on an “at-the-market” fixed exchange ratio based on the 20-day volume weighted average trading price of each party’s common stock prior to execution of the definitive merger agreement. The draft term sheet also provided that the board of directors of the combined company would be comprised of fourteen directors, with seven directors to be designated by each of Chemical and TCF, and that Mr. Torgow would serve as the Chairman of the board. Mr. Provost would serve as a director and initially as Chief Executive Officer and President of the combined holding company, before transitioning within eighteen months following the closing to serve as Chairman of the combined company’s bank subsidiary. Mr. Dahl would serve as a director and initially serve as the Chairman and Chief Executive Officer of the combined company’s bank subsidiary, before transitioning within eighteen months following the closing to serve as Chief Executive Officer and President of the combined holding company. The draft term sheet contemplated that the combined company would adopt the TCF name, and that the headquarters of the holding company would be in Detroit, Michigan.

On September 7, 2018, the TCF board of directors held a meeting to discuss the possible transaction with Chemical as well as other potential strategic alternatives for TCF, with members of TCF management and representatives of J.P. Morgan, Perkins Advisors, LLC, who also served as TCF’s financial advisor, which we refer to as Perkins Advisors, and Simpson Thacher & Bartlett LLP, legal counsel to TCF, which we refer to as Simpson Thacher, in attendance. Mr. Dahl reported to the TCF board of directors on the various meetings and discussions he and other representatives of TCF management had with representatives of Chemical regarding a potential business combination of TCF and Chemical. Mr. Dahl then discussed with the TCF board of directors various strategic alternatives that could potentially be available to TCF, including TCF continuing as a standalone company focusing exclusively on organic growth, smaller acquisitions of other banks, more significant transactions (including large acquisitions or a merger of equals) and a transaction involving the sale of TCF. A representative of Simpson Thacher then reviewed with the TCF board of directors certain legal matters, including the directors’ fiduciary duties under Delaware law and certain legal aspects of a merger of equals transaction. The representatives of J.P. Morgan then discussed with the TCF board of directors, among other matters, certain considerations regarding merger of equals transactions, the transactional landscape in the financial services industry and certain financial and other information regarding Chemical, and reviewed certain preliminary financial analyses prepared by J.P. Morgan of TCF, Chemical and a potential business combination of TCF and Chemical. Members of management and the representatives of J.P. Morgan then reviewed and discussed with the TCF board of directors certain preliminary terms of a potential all-stock, merger of equals business combination of Chemical and TCF that Mr. Dahl had discussed with Messrs. Torgow and Provost and the strategic rationale for exploring such a transaction. Following discussion, the TCF board of directors

 

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authorized TCF management, with the assistance of TCF’s financial and legal advisors, to continue their discussions with representatives of Chemical and its advisors and their due diligence investigation of Chemical.

On September 13, 2018, Chemical provided the draft non-binding term sheet to TCF.

On September 20, 2018, the Chemical board of directors held a meeting, which was attended by members of Chemical management and representatives of Nelson Mullins. Members of Chemical management provided an update to the board regarding the discussions with TCF, ongoing due diligence and work on financial matters with respect to a potential business combination with TCF.

On September 23 and 24, 2018, a wider group of Chemical and TCF management representing the respective key functions and businesses of the two banks met in Detroit, Michigan to discuss various aspects of each party’s business and their potential integration.

On September 27, 2018, the Chemical strategic initiatives committee held a meeting, which was attended by members of Chemical management and representatives of KBW and Nelson Mullins. Members of Chemical management provided an update regarding due diligence and the work on financial matters in process between the parties and their respective financial advisors. The Chemical strategic initiatives committee met on multiple subsequent occasions and reviewed and discussed the potential business combination with members of Chemical management and Chemical’s advisors.

On October 8, 2018, members of Chemical management, together with representatives of Nelson Mullins and KBW, discussed the non-binding draft term sheet on a telephone call with Mr. Dahl and representatives of Simpson Thacher and TCF’s financial advisors.

After the call, TCF delivered a revised draft non-binding term sheet to Chemical. The revised draft non-binding term sheet provided, among other things, for an all-stock business combination of TCF and Chemical based on a to-be-agreed fixed exchange ratio. The term sheet also included additional proposed details on the contemplated governance arrangements, including that Mr. Dahl would, in addition to serving as the Chairman and Chief Executive Officer of the combined company’s bank subsidiary, initially serve as the vice Chairman and Chief Operating Officer of the combined holding company after the closing, before transitioning within eighteen months after the closing to serve as the Chief Executive Officer and President of the combined holding company, and that an independent director of TCF would serve as the lead director of the combined holding company. In addition, during the three-year period after the closing, any changes to the board composition or senior executive roles would require approval of at least 75% of the board of the combined holding company.

Also on October 8, 2018, TCF management provided the TCF board of directors with an update regarding the discussions with Chemical of a potential transaction, including the management meetings on September 23 and 24, 2018 and the ongoing discussions with representatives of Chemical regarding the potential governance and management structure of the combined company.

On multiple occasions over the following weeks, the respective management teams of Chemical and TCF, with the assistance of their respective legal counsel and financial advisors, engaged in discussions with respect to the terms of a potential transaction, including with respect to the appropriate method for determining the exchange ratio, a board governance and management structure designed to achieve meaningful participation by both companies in the future strategic direction of the combined company, and the location of the combined company’s headquarters and major operational centers, and exchanged non-binding term sheet drafts reflecting these discussion points.

On October 17, 2018, management of Chemical and management of TCF met in Minneapolis, Minnesota to conduct additional in-person due diligence sessions and further discuss various aspects of each party’s business and operations, and the integration of their respective businesses.

 

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On October 23, 2018, the Chemical board of directors held a meeting that was attended by members of Chemical management and representatives of Nelson Mullins and KBW. At the meeting, representatives of KBW reviewed with the Chemical board of directors the bank equity and M&A markets and strategic alternatives potentially available to Chemical. The Chemical board of directors discussed with Chemical management and representatives of KBW and Nelson Mullins various strategic alternatives potentially available to Chemical, including a business combination with TCF. Representatives of Nelson Mullins reviewed with the Chemical board of directors their fiduciary duties in connection with consideration of a business combination transaction.

On October 24, 2018, the TCF board of directors held a meeting that was attended by members of TCF’s management and representatives of J.P. Morgan, Perkins Advisors and Simpson Thacher, to discuss, among other matters, the potential business combination of TCF and Chemical. TCF management updated the TCF board of directors regarding the status of the discussions with Chemical and its advisors, including the ongoing negotiation of the governance arrangements for the combined company. TCF management reviewed and discussed with the TCF board of directors the status, process and preliminary findings of TCF’s ongoing due diligence regarding Chemical. Representatives of J.P. Morgan discussed with the TCF board of directors certain financial information of TCF and Chemical, including each company’s recent stock price performance, and reviewed certain preliminary financial analyses prepared by J.P. Morgan of TCF, Chemical and the potential transaction. Following further discussion, the TCF board of directors authorized TCF management, with the assistance of TCF’s financial and legal advisors, to continue their discussions with Chemical regarding a potential business combination transaction.

On October 30, 2018, Messrs. Shafer and Dahl met in Detroit, Michigan and discussed various aspects of each party’s business and operations, including each company’s anticipated stand-alone earnings, and potential cost synergies and revenue enhancements.

Over the course of October, however, the significant volatility in bank stock prices, including the trading prices for both Chemical’s and TCF’s shares, worsened substantially. In light of these market developments, which adversely affected the parties’ ability to agree on a mutually acceptable exchange ratio, as well as continuing open issues regarding board composition and leadership and senior management structure for a combined company, discussions with respect to a potential business combination were discontinued on November 2, 2018.

On November 5, 2018, the TCF board of directors held a meeting, during which TCF management briefed the board on the recent developments regarding the potential business combination transaction, including that discussions with Chemical had been discontinued.

Subsequently, on November 30, 2018, Messrs. Provost, Torgow and Dahl met at a banking industry conference in New York and discussed again the potential benefits of a merger of equals between the two companies, as well as potential steps to reengage in discussions. They agreed to explore whether the significant potential benefits of a merger of equals transaction to both parties made re-engaging in discussions advisable, notwithstanding the current stock market volatility.

On December 13, 2018, the Chemical board of directors held a meeting that was attended by members of Chemical management and representatives of Nelson Mullins. The Chemical board of directors and management discussed the potential benefits of a merger of equals between the two companies and concluded that, notwithstanding the recent market volatility, it was worthwhile to pursue further discussions. Members of Chemical management and representatives of Nelson Mullins discussed with the Chemical board of directors a draft of a revised non-binding term sheet. The revised draft term sheet provided, among other things, that TCF would merge with Chemical, with TCF shareholders to receive Chemical stock based on a fixed exchange ratio to be agreed upon by the parties, with the parties to also discuss up to a potential five percent cash component to be paid to the TCF shareholders in lieu of stock consideration. It also provided for a sixteen-person board of

 

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directors, including Messrs. Torgow, Provost, Dahl and Opperman, and a realignment of certain executive roles, with Mr. Dahl becoming Chief Executive Officer of the combined holding company as well as the combined bank and Mr. Provost becoming Chairman of the combined bank, in each case, immediately upon closing, and with Mr. Torgow continuing to serve as the Chairman of the board of the combined holding company upon closing. Following further discussion, the Chemical board of directors authorized Chemical management to further negotiate with respect to the terms contemplated by the draft revised non-binding term sheet and to otherwise continue to explore a potential transaction with TCF.

On December 17, 2018, members of Chemical management, together with representatives of Nelson Mullins and KBW, discussed the revised non-binding draft term sheet with Mr. Dahl, J.P. Morgan, Perkins Advisors and Simpson Thacher.

On December 19, 2018, the TCF board of directors met, with members of TCF management and representatives of J.P. Morgan, Perkins Advisors and Simpson Thacher in attendance. TCF management updated the TCF board of directors on the resumption of discussions between TCF and Chemical regarding a potential transaction. Mr. Dahl also discussed with the TCF board of directors the proposed governance arrangements for the combined company currently under negotiation. The representatives of J.P. Morgan then discussed with the TCF board of directors, among other matters, certain financial information of TCF and Chemical, and reviewed certain preliminary financial analyses regarding potential exchange ratios prepared by J.P. Morgan. Following discussion, the TCF board of directors authorized TCF management to resume their due diligence investigation of Chemical and, with the assistance of TCF’s financial and legal advisors, to continue to discuss the terms of a potential transaction with Chemical.

On January 3, 2019, Simpson Thacher delivered an initial draft of the merger agreement to Nelson Mullins, which draft contemplated an all-stock merger based on a to-be-agreed fixed exchange ratio. Through January 27, 2018, the respective management teams of Chemical and TCF, with the assistance of their respective legal counsel, engaged in due diligence and, with the assistance of their respective financial advisors, engaged in financial modeling work and negotiations with respect to the merger agreement and exchanged multiple drafts of the merger agreement as well as ancillary documents, including retention/employment agreements for Messrs. Torgow, Provost and Dahl based on their proposed roles with the combined company, as well as conforming amendments to Chemical’s bylaws to address board composition and leadership and senior executive positions of the combined company. Wachtell, Lipton, Rosen & Katz, which we refer to as Wachtell Lipton, served as special counsel to Chemical with respect to employment agreement and benefit plan-related matters.

On January 9, 2019, the Chemical strategic initiatives committee held a meeting that was attended by members of Chemical management and representatives of KBW and Nelson Mullins. Representatives of KBW reviewed, together with members of Chemical management, potential financial aspects of a merger with TCF. The committee discussed the terms of the initial draft of the merger agreement with members of Chemical management and representatives of Nelson Mullins.

On January 9 and 10, 2019, Messrs. Provost, Shafer, Torgow and Dahl met in Detroit, Michigan and discussed various aspects of each party’s business and operations, including each company’s anticipated stand-alone earnings, management of the potential combined company, and potential cost synergies and revenue enhancements.

On January 10, 2019, the Chemical board of directors held a meeting that was attended by members of Chemical management and representatives of Nelson Mullins. Following an update regarding the due diligence review of TCF, members of Chemical management reviewed with the board of directors financial aspects of a potential merger with TCF and discussed the potential timing for a transaction. Mr. Dahl attended a portion of the Chemical board meeting and discussed the strategic vision of a combined company, cultural compatibility of Chemical and TCF, and business opportunities for the combined company.

 

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On January 11, 2019, the TCF board of directors met, with members of TCF management and representatives of J.P. Morgan, Perkins Advisors and Simpson Thacher in attendance. TCF management provided the TCF board of directors with an update regarding the status of the discussions and negotiations with Chemical regarding the potential merger, including a report on Mr. Dahl’s participation in the January 10, 2019 meeting of the Chemical board of directors and a proposed timeline until the announcement of a potential transaction. The representatives of J.P. Morgan then discussed with the TCF board of directors, among other matters, the recent stock price performance of TCF and Chemical and other financial information of the two companies and J.P. Morgan’s analysis of certain financial aspects of the proposed transaction assuming an at-the-market exchange ratio based on closing stock prices for TCF and Chemical as of January 10, 2019. Representatives of TCF management reviewed with the TCF board of directors the status and process of TCF’s ongoing due diligence regarding Chemical, including TCF’s preliminary diligence findings and the remaining diligence areas to be covered. The representative of Simpson Thacher then reviewed with the TCF board of directors the current terms of the proposed merger agreement.

On January 22, 2019, the Chemical board of directors held a meeting that was attended by members of Chemical management and representatives of Nelson Mullins. Members of Chemical management updated the Chemical board of directors on the progress of negotiation of the definitive transaction documents with TCF since the last meeting and discussed the potential timing of a transaction. The Chemical board of directors reviewed and discussed with representatives of Nelson Mullins certain terms of the draft merger agreement.

On January 23, 2019, the TCF board of directors met, with members of TCF management and representatives of J.P. Morgan, Perkins Advisors and Simpson Thacher in attendance. TCF management reviewed with the TCF board of directors the process and status of TCF’s ongoing due diligence investigation of Chemical, including their due diligence findings. The representatives of J.P. Morgan then discussed with the TCF board of directors, among other matters, J.P. Morgan’s analysis of certain financial aspects of the proposed transaction assuming an at-the-market exchange ratio based on recent closing stock prices for TCF and Chemical and certain financial information, and reviewed its preliminary financial analyses regarding TCF, Chemical and the potential transaction.

Following the close of trading on Friday, January 25, 2019, management of each of Chemical and TCF, and their respective financial advisors, discussed the exchange ratio for the potential merger agreement, and determined to propose to their respective boards of directors a fixed exchange ratio of 0.5081 shares of Chemical common stock for each share of TCF common stock in an all-stock merger, which represented an at-the-market exchange ratio based on the parties’ respective closing stock prices on January 25, 2019.

On January 27, 2019, prior to the scheduled special meeting of the Chemical board of directors, the Compensation and Pension Committee of the Chemical board of directors held a meeting that was attended by representatives of Wachtell Lipton and Nelson Mullins. Representatives of Wachtell Lipton reviewed and discussed with the committee the terms of the proposed retention agreements to be entered into by Chemical with Messrs. Torgow and Provost, and the proposed amended employment agreement to be entered into by TCF with Mr. Dahl, in connection with and effective upon the closing of the proposed business combination. Representatives of Wachtell Lipton also reviewed and discussed with the committee the proposed treatment of TCF and Chemical equity awards under the merger agreement. The Compensation and Pension Committee approved the proposed retention agreements to be entered into by Chemical with Messrs. Torgow and Provost, and the proposed treatment of TCF and Chemical equity awards under the merger agreement, subject to approval by the Chemical board of directors of the proposed merger agreement.

In the afternoon of January 27, 2019, a special meeting of the Chemical board of directors was held, which was attended by members of Chemical management and representatives of KBW and Nelson Mullins. Representatives of Nelson Mullins reviewed the fiduciary duties of directors in connection with considering business combination transactions. Representatives of Nelson Mullins also discussed with the board of directors proposed amendments to Chemical’s bylaws, which would address certain matters related to the conduct,

 

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adjournment and postponement of shareholders’ meetings and would require that certain types of legal actions, including certain actions brought against Chemical or its directors or officers, be brought in certain courts in Michigan. The Chemical board of directors approved such bylaw amendments.

Members of Chemical management updated the Chemical board of directors with respect to its due diligence review of TCF and discussed the strategic rationale for the merger. KBW then reviewed and discussed with the Chemical board of directors, among other matters, the financial aspects of the proposed merger and rendered to the Chemical board of directors an opinion, which was initially rendered verbally and confirmed by a written opinion dated January 27, 2019, to the Chemical board of directors to the effect that, as of that date and subject to the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by KBW as set forth in such opinion, the exchange ratio in the merger was fair, from a financial point of view, to Chemical. See “—Opinion of Chemical’s Financial Advisor.” Representatives of Nelson Mullins then reviewed and discussed with the Chemical board of directors the final terms of the proposed merger agreement. The Chemical board discussed the matters considered and approved at the Compensation and Pension Committee meeting earlier that day. Members of Chemical management also reviewed with the Chemical board of directors Chemical’s efforts to support community development programs in the communities it serves, including with respect to the Southeast Michigan metropolitan area, and that Chemical would make a donation in connection with the proposed merger to a Community Foundation of Southeast Michigan donor advised fund, which would focus on revitalization or community reinvestment efforts in the Southeast Michigan metropolitan area.

Following further discussion and after taking into consideration the matters discussed during the January 27, 2019 meeting and prior meetings of the Chemical board of directors, including the factors described under the section of this joint proxy statement/prospectus entitled “—Reasons for the Merger; Recommendation of the Chemical Board of Directors,” the Chemical board of directors unanimously determined that the merger agreement and the transactions contemplated thereby were fair to and in the best interests of Chemical and its shareholders, and adopted the merger agreement and approved the documents contemplated thereby, including the amendment and restatement of the Chemical bylaws, the Chemical articles amendment, and the certificate of designations for 5.70% Series C Non-Cumulative Perpetual Preferred Stock of Chemical, with each such document to be effective only if filed in connection with the completion of the merger, and recommended that the Chemical shareholders approve the Chemical merger proposal and the articles amendment proposal.

Also in the afternoon of January 27, 2019, the TCF board of directors met, with representatives of TCF management, J.P. Morgan, Perkins Advisors and Simpson Thacher in attendance. TCF management provided the board of directors with an update regarding the discussions and negotiations with Chemical since the prior board meeting, and the results of the completed due diligence review of Chemical. The representative of Simpson Thacher then reviewed with the TCF board of directors the final terms of the proposed merger agreement. Representatives of J.P. Morgan reviewed and discussed with the TCF board of directors, among other matters, J.P. Morgan’s analysis of certain financial aspects of the proposed transaction based on the 0.5081 exchange ratio and its financial analyses regarding the exchange ratio. Following discussion, the representatives of J.P. Morgan rendered J.P. Morgan’s oral opinion to the TCF board of directors, which was subsequently confirmed in writing, that, as of January 27, 2019 and based upon and subject to the factors and assumptions set forth in its opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to the holders of TCF’s common stock. See “—Opinion of TCF’s Financial Advisor.” A representative of TCF management then reviewed and discussed with the TCF board of directors the proposed amended and restated employment agreement to be entered into with Mr. Dahl.

Following further discussion and after taking into consideration the matters discussed during the January 27, 2019 meeting and prior meetings of the TCF board of directors, including the factors described under the section of this joint proxy statement/prospectus entitled “—Reasons for the Merger; Recommendation of the TCF Board of Directors,” the TCF board of directors unanimously approved the merger agreement and the transactions contemplated thereby, including the proposed merger, the amended and restated employment

 

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agreement to be entered into with Mr. Dahl (with Mr. Dahl abstaining from voting on the proposal to approve such agreement) and directed that the adoption of the merger agreement be submitted to a vote at a meeting of the TCF shareholders, and recommended that the TCF shareholders adopt the merger agreement. In addition, at this meeting the TCF board of directors also approved an amendment and restatement of TCF’s bylaws to add a new provision, which designated the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain legal actions, unless TCF consented in writing to the selection of an alternative forum.

On the evening of January 27, 2019, following the meetings of the TCF and Chemical boards of directors, the merger agreement and related transaction documents (including Mr. Dahl’s amended and restated employment agreement and Messrs. Torgow’s and Provost’s retention agreements) were executed and delivered by the applicable parties.

On the morning of January 28, 2019, TCF and Chemical publicly announced their entry into the merger agreement via a joint press release.

Recommendation of the Chemical Board of Directors and Reasons for the Merger

After careful consideration, the Chemical board of directors, at a special meeting held on January 27, 2019, unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of Chemical and its shareholders, and (ii) adopted the merger agreement and approved the execution and delivery of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, the issuance of Chemical common stock and Chemical Series C preferred stock (and related depositary shares) in connection with the merger, and the proposed amendment to the Chemical articles of incorporation to increase the number of authorized shares of Chemical common stock from 135 million to 220 million and to change the name of Chemical to “TCF Financial Corporation,” effective only upon consummation of the merger. Accordingly, the Chemical board of directors unanimously recommends that Chemical shareholders vote “FOR” the approval of the Chemical merger proposal, “FOR” the approval of the Chemical articles amendment proposal, “FOR” the Chemical compensation proposal and “FOR” the Chemical adjournment proposal.

In reaching its decision to adopt the merger agreement and to approve the merger and the other transactions contemplated by the merger agreement, and to recommend that Chemical’s shareholders approve the Chemical merger proposal, the Chemical articles amendment proposal, the Chemical compensation proposal and the Chemical adjournment proposal, the Chemical board of directors evaluated the merger and the merger agreement in consultation with Chemical management, as well as Chemical’s financial and legal advisors, and considered a number of factors, including the following principal factors:

 

   

each of Chemical’s and TCF’s business, operations, financial condition, asset quality, earnings and prospects. In reviewing these factors, the Chemical board of directors considered the following:

 

   

its view that Chemical’s business and operations complement those of TCF, which is anticipated to broaden market channels and customers and position the combined company to enhance revenues through increased scale and product and service offerings;

 

   

its view that the merger would position the combined company to leverage Chemical’s wealth management offerings and strength in commercial and corporate banking, and TCF’s strength in national lending verticals to create a more balanced franchise across consumer and commercial business lines;

 

   

its understanding that the merger would diversify Chemical’s loan portfolio, revenue streams and markets and strengthen its core retail deposit franchise, which may mitigate certain business risks;

 

   

the anticipated cost savings associated with the merger;

 

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the anticipated long-term earnings per share accretion for Chemical shareholders as a result of the merger; and

 

   

the anticipated impact of the transaction on the combined company, including the expected impact on additional key financial metrics (including tangible book value per share, return on assets, return on tangible common equity, and cash efficiency ratio) and on regulatory capital ratios.

 

   

its understanding of the current and prospective environment in which Chemical and TCF operate, including national and local economic conditions, the competitive environment for financial institutions generally, and the likely effect of these factors on Chemical both with and without the proposed transaction;

 

   

its views with respect to other potential strategic alternatives, including focusing exclusively on organic growth, making smaller acquisitions, pursuing other similarly-sized merger partners and pursuing larger merger partners;

 

   

its review and discussions with Chemical’s senior management and its outside legal counsel concerning the due diligence review of TCF;

 

   

its understanding that Chemical shareholders would own approximately 46.2% of the combined company’s common stock;

 

   

the fact that eight of 16 total directors of the combined company would be current members of the Chemical board of directors (including Messrs. Torgow and Provost);

 

   

the fact that Mr. Torgow will serve as Executive Chairman of the combined company, Mr. Dahl will serve as CEO and President of the combined company and Mr. Provost will serve as Vice Chairman of the combined company and Chairman of the board of directors of the combined bank;

 

   

the fact that Chemical’s bylaws would be amended to preserve certain corporate governance arrangements of the combined company (including senior executive management positions of the combined company and the allocation of directors between Chemical and TCF) for a period of at least three years following the closing of the merger;

 

   

the opinion of KBW, dated January 27, 2019, to the Chemical board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to Chemical of the exchange ratio in the merger, as more fully described below under “Opinion of Chemical’s Financial Advisor” beginning on page 76;

 

   

the terms of the merger agreement, including the expected tax treatment and the deal protection and termination fee provisions, which it reviewed with its outside legal counsel;

 

   

its view regarding the compatible nature of the cultures of the two companies, which it believes will help to facilitate integration and implementation of the business combination;

 

   

its understanding that Chemical’s and TCF’s senior leadership share beliefs in strong community ties, customer focus and accountability, and its views regarding the long-term impacts of such philosophies with respect to the development of the communities in which the combined company will operate and the business performance of the combined company;

 

   

its view that combined organization would have a stronger, deeper leadership team than Chemical as a stand-alone company and that Chemical and TCF have complementary strengths, which could facilitate enhanced operational performance, strategic growth, and risk management for the combined company;

 

   

the regulatory and other approvals required in connection with the merger and the likelihood that that such regulatory approvals will be received in a reasonably timely manner and without the imposition of unacceptable conditions;

 

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the fact that Chemical’s shareholders will have the opportunity to vote to approve the merger agreement;

 

   

its right to withdraw its recommendation to the Chemical shareholders that they approve the merger agreement and the right of the TCF board of directors to withdraw its recommendation to the TCF shareholders that they adopt the merger agreement, in each case in certain circumstances, as more fully described under “The Merger Agreement—Termination; Termination Fee” beginning on page 126;

 

   

the fact that Chemical or TCF may be obligated to pay the other party a termination fee of $134 million in certain circumstances as more fully described under “The Merger Agreement—Termination; Termination Fee” beginning on page 126;

 

   

the restrictions on the conduct of Chemical’s business during the period between execution of the merger agreement and the consummation of the merger, which restrictions are customary for public company merger agreements involving financial institutions but which, subject to specific exceptions, could delay or prevent Chemical from undertaking business opportunities that might arise or certain other actions it might otherwise take with respect to Chemical’s operations absent the pendency of the merger;

 

   

the potential risks associated with achieving, within anticipated time periods or at all, cost savings and successfully integrating the businesses, operations, and workforces of Chemical and TCF, including the costs and risks of successfully integrating the differing business models and lines of business of the two companies;

 

   

the possibility that the merger and the related integration process could result in the loss of key employees, in the disruption of Chemical’s ongoing business and in the loss of customers for the combined company;

 

   

that there can be no assurance that all conditions to the parties’ obligations to complete the merger will be satisfied, including the risk that certain regulatory approvals might not be obtained;

 

   

the substantial costs to be incurred in connection with the merger, including the costs of integrating the businesses of Chemical and TCF, transaction fees, expenses and other payments that will or may arise from the merger;

 

   

the potential risk of diverting management attention and resources from the operation of Chemical’s business and towards the completion of the merger and the integration of the two companies; and

 

   

the risk that the merger may not be completed despite the combined efforts of Chemical and TCF, or that completion may be unduly delayed, even if the required regulatory approvals are obtained and the requisite approvals are obtained from the Chemical shareholders and the TCF shareholders.

This discussion of the information and factors considered by Chemical’s board of directors in reaching its conclusions and recommendation includes principal factors considered by the board of directors, but is not intended to be exhaustive and may not include all of the factors considered by the Chemical board of directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the other transactions contemplated by the merger agreement, and the complexity of these matters, the Chemical board of directors did not find it useful and did not attempt to quantify, rank or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the merger and the other transactions contemplated by the merger agreement, and to make its recommendation to Chemical shareholders. Rather, the Chemical board of directors viewed its decisions as being based on the totality of the information presented to it and the factors it considered. In addition, individual members of the Chemical board of directors may have assigned different weights to different factors.

 

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Certain of Chemical’s directors and executive officers have other interests in the merger that are different from, or in addition to, those of Chemical’s shareholders generally, as discussed under the caption “The Merger – Interests of Chemical Directors and Executive Officers in the Merger,” below. The Chemical board of directors was aware of and considered these potential interests, among other matters, in evaluating the merger and in making its recommendation to Chemical shareholders.

Recommendation of the TCF Board of Directors and Reasons for the Merger

After careful consideration, the TCF board of directors, at a special meeting held on January 27, 2019, unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of TCF and its shareholders, (ii) declared the merger agreement advisable and (iii) approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby, including the merger. Accordingly, the TCF board of directors unanimously recommends that the TCF shareholders vote “FOR” the merger proposal, “FOR” the TCF compensation proposal and “FOR” the TCF adjournment proposal.

In reaching its decision to approve the merger agreement and the transactions contemplated thereby, including the merger, and to recommend that TCF’s shareholders adopt the merger agreement, the TCF board of directors consulted with TCF management, as well as its financial and legal advisors, and considered a number of factors, including the following:

 

   

each of TCF’s and Chemical’s business, operations, financial condition, stock performance, asset quality, earnings and prospects. In reviewing these factors, including the information obtained through due diligence, the TCF board of directors considered the following:

 

   

its view that the merger is a strategically compelling transaction that will create a stronger company, elevate growth and provide meaningful long-term value for the shareholders of both TCF and Chemical;

 

   

that shareholders of TCF and Chemical would benefit from expected annual cost synergies from maximizing efficiencies across the combined organization;

 

   

its view that the combined company would be strategically positioned to capitalize on market opportunities and better serve its customers throughout several of the largest, most attractive markets in the Midwest;

 

   

that the combined company would have the scale to better invest, compete and perform by leveraging leading market positions and complementary products;

 

   

its view that TCF’s strength in national lending verticals complements Chemical’s core in-market commercial lending and wealth management offerings, which would broaden opportunities to drive sustainable growth and increase market share;

 

   

its view that TCF’s and Chemical’s shared strengths in infrastructure, digital platforms and mortgage banking would enhance the combined company’s position while improving efficiency;

 

   

its view that the proposed merger would 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 and that the combined company would have increased capacity for loan growth while maintaining its current risk tolerances;

 

   

that both TCF and Chemical share a legacy of developing deep community ties, along with core values centered on customer service, accountability and adaptability to market changes and the expectation that the combined company would continue to provide philanthropic, civic and economic development support to the communities in which it operates;

 

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its view that, in light of the agreed-upon governance arrangements, the combined company would have a stronger, deeper leadership team with complementary expertise to drive enhanced operational performance, strategic growth and risk management;

 

   

the anticipated impact of the transaction on the combined company, including the expected impact on financial metrics (including earnings per share, return on average assets, return on average tangible common equity and cash efficiency ratio);

 

   

the historical performance of TCF and Chemical common stock; and

 

   

its review and discussions with TCF’s management and its legal advisors concerning the due diligence review of Chemical;

 

   

its familiarity of the current and prospective environment in the financial services industry, including economic conditions and the interest rate and regulatory environments, possible effects of scale, increased operating costs resulting from regulatory and compliance mandates, increasing competition from both nationwide banks and non-bank financial and financial technology firms, and current financial market conditions and the likely effects of these factors on TCF’s and the combined company’s potential growth, development productivity and strategic options, and the likely effect of these factors on TCF both with and without the proposed transaction;

 

   

its views with respect to other strategic alternatives potentially available to TCF, including continuing as a standalone company focusing exclusively on organic growth, making smaller acquisitions of other banks, transformative transactions (including large acquisitions or a merger of equals) and a transaction involving the sale of TCF;

 

   

the structure of the transaction as a merger of equals in which TCF’s board of directors and management would have significant participation in the combined company; in particular, the provisions of the merger agreement setting forth the corporate governance of the combined company, including:

 

   

that, until the third anniversary of the consummation of the merger, the board of directors of the combined holding company would consist of sixteen members, with eight from each of Chemical and TCF (including Mr. Dahl and Vance Opperman, the current Lead Director of TCF’s board of directors);

 

   

that (i) Mr. Craig Dahl, the current Chairman, President and Chief Executive Officer of TCF, would become and serve as the Chief Executive Officer and President of the combined holding company, (ii) Mr. Opperman would become Lead Director of the combined holding company and (iii) other members of TCF management would participate in the senior management of the combined holding company and the combined bank; and

 

   

that the affirmative vote of at least 75% of the board of the combined company would be required to remove Mr. Dahl or Mr. Opperman from serving in the capacities referred to above;

 

   

the consistency of the transaction with TCF’s business strategies, including achieving strong earnings growth, reaching new markets, improving customer attraction and retention, developing technology capabilities and focusing on cost management;

 

   

its conclusion that TCF and Chemical are a complementary fit because of the nature of the markets served and products offered by TCF and Chemical and the expectation that the transaction would provide economies of scale, enhanced ability to invest in technology and innovation, expanded product offerings, improved efficiencies and reduced costs and enhanced opportunities for growth;

 

   

TCF’s and Chemical’s shared belief in a purpose-driven and thoughtful approach to the combination and the resulting company, structured to maximize the potential for synergies and positive impact to local communities and minimize the loss of customers and employees and to further diversify the

 

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combined company’s operating risk profile compared to the risk profile of either company on a stand-alone basis;

 

   

the belief that the transaction is likely to increase value to shareholders, given that, from the perspective of a TCF shareholder, the transaction is expected to be immediately accretive in 2020;

 

   

the expectation that the transaction will be generally tax-free for United States federal income tax purposes to TCF shareholders;

 

   

the analyses and presentations by J.P. Morgan and its oral opinion to the TCF board of directors, which was subsequently confirmed in writing, that, as of January 27, 2019 and based upon and subject to the factors and assumptions set forth in its opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to the holders of TCF’s common stock. See “—Opinion of TCF’s Financial Advisor” beginning on page 86;

 

   

the financial and other terms of the merger agreement, which TCF reviewed with its outside financial and legal advisors, including:

 

   

its expectation that, upon consummation of the merger, TCF shareholders would own approximately 54% of the combined company on a fully diluted basis;

 

   

the fact that the exchange ratio is fixed, which the TCF board of directors believed was consistent with market practice for transactions of this type and with the strategic purpose of the transaction;

 

   

the fact that TCF’s shareholders will have an opportunity to vote on the adoption of the merger agreement;

 

   

the right of the TCF board of directors under the merger agreement to withdraw its recommendation to the TCF shareholders that they adopt the merger agreement and the right of the Chemical board of directors under the merger agreement to withdraw its recommendation to the Chemical shareholders that they approve the merger agreement, in each case, in certain circumstances, as more fully described under “The Merger Agreement—Covenants and Agreements” and “The Merger Agreement—Termination; Termination Fee” beginning on pages 117 and 126, respectively;

 

   

the rights of TCF and Chemical to terminate the merger agreement in certain circumstances, as more fully described under “The Merger Agreement—Termination; Termination Fee” beginning on page 126; and

 

   

the fact that TCF or Chemical may be obligated to pay the other party a termination fee of $134 million in certain circumstances, as more fully described under “The Merger Agreement—Termination; Termination Fee” beginning on page 126;

 

   

the potential for the value of the merger consideration to be received by holders of shares of TCF common stock to be adversely affected by a decrease in the trading price of Chemical common stock;

 

   

the potential risks associated with achieving anticipated efficiency improvements and cost reductions and savings and successfully integrating Chemical’s business, operations and workforce with those of TCF;

 

   

the nature and amount of payments and other benefits to be received by TCF management in connection with the merger pursuant to existing TCF plans and compensation arrangements and the merger agreement;

 

   

the potential risk of diverting management attention and resources from the operation of TCF’s business and towards the completion of the merger and the integration of the two companies;

 

   

the regulatory and other approvals required in connection with the merger and the expected likelihood that such regulatory approvals will be received in a reasonably timely manner and without the imposition of unacceptable conditions;

 

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the restrictions on the conduct of TCF’s business during the period between execution of the merger agreement and the consummation of the merger, which could potentially delay or prevent TCF from undertaking business opportunities that might arise or certain other actions it might otherwise take with respect to its operations absent the pendency of the merger;

 

   

the potential effect of the merger on TCF’s overall business, including its relationships with customers, employees, suppliers and regulators;

 

   

the risk of losing key TCF or Chemical employees during the pendency of the merger and thereafter;

 

   

the substantial costs to be incurred in connection with the merger, including the costs of integrating the businesses of TCF and Chemical, transaction fees, expenses and other payments that will or may arise from the merger;

 

   

the fact that TCF shareholders would not be entitled to appraisal or dissenters’ rights in connection with the merger;

 

   

that TCF’s directors and executive officers may have interests in the merger that are different from or in addition to those of its shareholders generally, as more fully described under “—Interests of TCF Directors and Executive Officers in the Merger,” beginning on page 100;

 

   

the risk that the merger may not be completed despite the combined efforts of TCF and Chemical or that completion may be unduly delayed, even if the required regulatory approvals are obtained and the requisite approvals are obtained from TCF and Chemical shareholders; and

 

   

the other risks described under the section entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” beginning on pages 31 and 29, respectively.

The foregoing discussion of the information and factors considered by the TCF board of directors is not intended to be exhaustive and may not include all of the factors considered by the TCF board of directors. In view of the variety of factors considered in connection with its consideration of the merger and the other transactions contemplated by the merger agreement, and the complexity of these matters, the TCF board of directors did not find it useful, and did not attempt, to quantify, rank or otherwise assign any relative or specific weights to the factors considered in reaching its determination. The above factors are not listed in any particular order of priority. Rather, the TCF board of directors viewed its decisions as being based on the totality of the information presented to it and the factors it considered, including its discussions with and questioning of members of TCF management and TCF’s outside legal and financial advisors. In addition, individual members of the TCF board of directors may have assigned different weights to different factors.

Certain of TCF’s directors and executive officers have other interests in the merger that are different from, or in addition to, those of TCF’s shareholders generally, as discussed under the caption “—Interests of TCF Directors and Executive Officers in the Merger,” below. The TCF board of directors was aware of and considered these potential interests, among other matters, in evaluating the merger and in making its recommendation to TCF shareholders.

Unaudited Financial Forecasts

Chemical and TCF do not, as a matter of course, publicly disclose forecasts or internal projections as to future performance, revenues, earnings, financial condition or other results due to, among other reasons, the inherent uncertainty of the underlying assumptions and estimates.

However, in connection with the merger, TCF senior management prepared or approved for use certain unaudited prospective financial information with respect to TCF on a standalone basis and without giving effect to the merger, which we refer to as the TCF financial forecasts, Chemical senior management prepared or approved for use certain unaudited prospective financial information with respect to Chemical on a standalone

 

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basis and without giving effect to the merger, which we refer to as the Chemical financial forecasts, and Chemical senior management and TCF senior management jointly prepared certain unaudited prospective financial information with respect to the combined company after giving effect to the merger, which we refer to as the joint financial forecasts, including, among other things, estimated costs savings expenses, resulting or derived from the merger, which were provided to and considered by KBW and J.P. Morgan for the purpose of performing financial analyses in connection with their respective opinions, as described in this joint proxy statement/prospectus under the heading “—Opinion of TCF’s Financial Advisor” beginning on page 86 and “—Opinion of Chemical’s Financial Advisor” beginning on page 76, respectively, and the Chemical and TCF boards of directors in connection with their respective evaluations of the merger. We refer to the TCF financial forecasts, the Chemical financial forecasts and the joint financial forecasts collectively as the “financial forecasts.”

The financial forecasts were not prepared for the purposes of, or with a view toward, public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information, published guidelines of the SEC regarding forward-looking statements or generally accepted accounting principles. A summary of certain significant elements of this information is set forth below, and is included in this joint proxy statement/prospectus solely for the purpose of providing Chemical shareholders and TCF shareholders access to certain nonpublic information made available to Chemical’s and TCF’s respective financial advisors for the purpose of performing financial analyses in connection with their respective opinions. The information included below does not comprise all of the prospective financial information provided to Chemical’s or TCF’s respective financial advisors.

Although presented with numeric specificity, the financial forecasts reflect numerous estimates and assumptions made by Chemical senior management or TCF senior management, as applicable, at the time such forecasts were prepared or approved for use by their respective financial advisors and represent Chemical senior management’s or TCF senior management’s respective evaluation of Chemical’s expected future financial performance on a stand-alone basis, without reference to the merger, and TCF senior management’s evaluation of TCF’s expected future financial performance on a stand-alone basis, without reference to the merger, and Chemical senior management’s and TCF senior management’s respective evaluation of, among other things, estimated costs savings, expenses, capital transactions and purchase accounting adjustments expected to result or be derived from the merger with respect to the combined company or to be completed prior to or in connection with the closing of the merger. These and the other estimates and assumptions underlying the financial forecasts involve judgments with respect to, among other things, economic, competitive, regulatory and financial market conditions and future business decisions that may not be realized and that are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among other things, the inherent uncertainty of the business and economic conditions affecting the industries in which Chemical and TCF operate and the risks and uncertainties described under “Risk Factors” beginning on page 31, “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 29 and in the reports that Chemical and TCF respectively file with the SEC from time to time, all of which are difficult to predict and many of which are outside the control of Chemical and TCF and will be beyond the control of the combined company following completion of the merger. There can be no assurance that the underlying assumptions would prove to be accurate or that the projected results would be realized, and actual results could differ materially from those reflected in the financial forecasts, whether or not the merger is completed. Further, these assumptions do not include all potential actions that the senior management of Chemical or TCF could or might have taken during these time periods. The inclusion in this joint proxy statement/prospectus of the unaudited prospective financial information below should not be regarded as an indication that Chemical, TCF or their respective boards of directors or financial advisors, considered, or now consider, these projections and forecasts to be material information to any Chemical shareholder or TCF shareholder, as the case may be, particularly in light of the inherent risks and uncertainties associated with those projections and forecasts. The financial forecasts are not fact and should not be relied upon as being necessarily indicative of actual future results, and this information should not be relied on as such. The financial forecasts also reflect numerous variables, expectations and assumptions available at the

 

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time they were prepared as to certain business decisions that are subject to change and do not take into account any circumstances or events occurring after the date they were prepared. No assurances can be given that if these financial forecasts and the underlying assumptions had been prepared as of the date of this joint proxy statement/prospectus, similar assumptions would be used. In addition, the financial forecasts may not reflect the manner in which the combined company would operate after the merger.

KPMG LLP (Chemical’s and TCF’s independent registered public accounting firm) has not examined, compiled or otherwise performed any procedures with respect to the prospective financial information contained in these financial forecasts and, accordingly, KPMG LLP has not expressed any opinion or given any other form of assurance with respect thereto and they assume no responsibility for the prospective financial information. The reports of the independent registered public accounting firm incorporated by reference in this joint proxy statement/prospectus relate to the historical financial information of Chemical and TCF, respectively. Such reports do not extend to the financial forecasts and should not be read to do so. No independent registered public accounting firm has examined, compiled or otherwise performed any procedures with respect to the prospective financial information contained in these financial forecasts and, accordingly, no independent registered public accounting firm has expressed any opinion or given any other form of assurance with respect thereto and no independent registered public accounting firm assumes any responsibility for the prospective financial information.

In light of the foregoing, and taking into account that the Chemical special meeting and the TCF special meeting will be held several months after the financial forecasts were prepared, as well as the uncertainties inherent in any forecasted information, Chemical shareholders and TCF shareholders are strongly cautioned not to place unwarranted reliance on such information, and Chemical and TCF urge all Chemical shareholders and TCF shareholders to review Chemical’s and TCF’s respective most recent SEC filings for descriptions of Chemical’s and TCF’s respective reported financial results. See “Where You Can Find More Information” in the forepart of this joint proxy statement/prospectus.

TCF Financial Forecasts

For purposes of the financial analyses performed in connection with J.P. Morgan’s and KBW’s respective opinions, TCF senior management provided J.P. Morgan and KBW with TCF management’s estimates of certain income metrics for TCF in 2019, which included EPS for TCF in 2019 of $2.10 per share, as well as estimated long-term earnings and balance sheet growth rates and certain other assumptions to be used to extrapolate TCF’s financial results thereafter. TCF senior management also provided J.P. Morgan with TCF management’s estimate of TCF net income available to common shareholders for 2019 of $327 million.

The following table presents the consensus Wall Street research estimates for TCF’s 2019 and 2020 net income available to TCF common shareholders and EPS, which we refer to collectively as the TCF street estimates, that were used by KBW in connection with the financial analyses performed in connection with KBW’s opinion:

 

     2019E      2020E  

Net Income Available to Common Shareholders (in millions)

   $ 311      $ 314  

Earnings Per Share

   $ 1.92      $ 2.00  

For purposes of extrapolating TCF financial results, TCF senior management provided J.P. Morgan and KBW with, among other things, estimated long-term annual growth rates of 3% for TCF’s net income and 2% for TCF’s balance sheet, an estimated pre-tax cost of cash of 2.50% and an estimated marginal tax rate of 21.0%.

Chemical Financial Forecasts

For purposes of the financial analyses performed in connection with KBW’s and J.P. Morgan’s respective opinions, Chemical senior management provided KBW and J.P. Morgan with Chemical management’s

 

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estimated net income and EPS for Chemical in 2019, estimated long-term earnings and balance sheet growth rates and certain other assumptions to be used to extrapolate Chemical’s financial results and dividends thereafter. Chemical senior management’s estimates of Chemical net income and EPS for 2019 were $299.3 million and $4.14 per share, respectively.

The following table presents the consensus Wall Street research estimates for Chemical’s 2019 and 2020 net income and EPS, which we refer to collectively as the Chemical street estimates, that were used by KBW in connection with the financial analyses performed in connection with KBW’s opinion:

 

     2019E      2020E  

Net Income (in millions)

   $ 297.4      $ 314.5  

Earnings Per Share

   $ 4.12      $ 4.38  

For purposes of extrapolating Chemical financial results, Chemical senior management provided KBW and J.P. Morgan with, among other things, an estimated long-term annual growth rate of 3% for Chemical’s net income and balance sheet, an estimated pre-tax cost of cash of 2.50% and an estimated marginal tax rate of 21.0%.

Pro Forma Assumptions – Estimated Costs Savings and Expenses Resulting or Derived from the Merger and Purchase Accounting Adjustments

For purposes of Pro Forma Impact Analysis and Illustrative Pro Forma Combined Discounted Cash Flow Analysis performed by KBW, and for purposes of Value Creation analysis performed by J.P. Morgan, senior management of each of Chemical and TCF provided to KBW and J.P. Morgan, respectively, certain assumptions that had been jointly developed by Chemical and TCF, with respect to estimated cost savings and expenses expected to result or be derived from the proposed merger, including among other things: (i) an estimate of $180 million of annual pre-tax cost savings (synergies) expected to result or be derived from the merger, with $75 million of such annual cost savings to be phased in during the first 12 months after the closing of the merger and the full amount of such annual cost savings to be realized annually thereafter, and (ii) an estimate of $325 million of pre-tax merger, integration and restructuring costs expected to result from the merger.

For purposes of Pro Forma Impact Analysis and Illustrative Pro Forma Combined Discounted Cash Flow Analysis performed by KBW, senior management of Chemical provided to KBW certain purchase accounting assumptions with respect to the proposed merger that had been jointly developed by Chemical and TCF, including a gross credit mark on loans of approximately $189 million in excess of the reserve, with approximately $25 million of Chemical non-accretable credit discount to be reversed at closing of the merger and netted against the gross credit mark; rate, spread and other fair value market value marks representing an aggregate discount of approximately $200 million, to be accreted based on estimated remaining life of individual assets and liabilities; and a core deposit intangible of approximately $168 million, to be amortized over ten years utilizing the sum-of-the-digits methodology.

General

The financial forecasts were prepared separately using, in some cases, different assumptions, and are not intended to be added together. Adding the financial forecasts together for the two companies is not intended to represent the results the combined company will achieve if the merger is completed and is not intended to represent forecasted financial information for the combined company if the merger is completed.

By including in this joint proxy statement/prospectus a summary of the financial forecasts, neither Chemical nor TCF nor any of their respective representatives has made or makes any representation to any person regarding the ultimate performance of Chemical or TCF compared to the information contained in the financial forecasts. Neither Chemical, TCF nor, after completion of the merger, the combined company

 

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undertakes any obligation to update or otherwise revise the financial forecasts or financial information to reflect circumstances existing since their preparation or to reflect the occurrence of subsequent or unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error, or to reflect changes in general economic or industry conditions.

The financial forecasts summarized in this section are not being included in this joint proxy statement/prospectus in order to induce any TCF shareholder to vote in favor of the TCF merger proposal or any of the other proposals to be voted on at the TCF special meeting or to induce any Chemical shareholder to vote in favor of the Chemical merger proposal or any of the other proposals to be voted on at the Chemical special meeting.

Opinion of Chemical’s Financial Advisor

Chemical engaged Keefe, Bruyette & Woods, Inc., which we refer to as KBW, to render financial advisory and investment banking services to Chemical, including an opinion to the Chemical board of directors as to the fairness, from a financial point of view, to Chemical of the exchange ratio in the proposed merger. Chemical selected KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger. As part of its investment banking business, KBW is continually engaged in the valuation of financial services businesses and their securities in connection with mergers and acquisitions.

As part of its engagement, representatives of KBW attended the meeting of the Chemical board of directors held on January 27, 2019 at which the Chemical board of directors evaluated the proposed merger. At this meeting, KBW reviewed the financial aspects of the proposed merger and rendered an opinion, initially rendered verbally and confirmed by written opinion, dated January 27, 2019, to the Chemical board of directors, to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by KBW as set forth in such opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to Chemical. The Chemical board of directors adopted the merger agreement at this meeting.

The description of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as Annex B to this joint proxy statement/prospectus and is incorporated herein by reference, and describes the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by KBW in preparing the opinion.

KBW’s opinion speaks only as of the date of the opinion. The KBW opinion was provided for the information of, and was directed to, the Chemical board of directors (in its capacity as such) in connection with, and for purposes of, its consideration of the financial terms of the merger. The opinion addressed only the fairness, from a financial point of view, of the exchange ratio in the merger to Chemical. It did not address the underlying business decision of Chemical to engage in the merger or enter into the merger agreement or constitute a recommendation to the Chemical board of directors in connection with the merger, and it does not constitute a recommendation to any holder of Chemical common stock or any shareholder of any other entity as to how to vote in connection with the merger or any other matter.

KBW’s opinion was reviewed and approved by KBW’s Fairness Opinion Committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.

In connection with the opinion, KBW reviewed, analyzed and relied upon material bearing upon the financial and operating condition of Chemical and TCF and bearing upon the merger, including, among other things:

 

   

a draft of the merger agreement, dated January 26, 2019 (the most recent draft then made available to KBW);

 

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the audited financial statements and the Annual Reports on Form 10-K for the three fiscal years ended December 31, 2017 of Chemical;

 

   

the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2018, June 30, 2018 and September 30, 2018 of Chemical;

 

   

certain draft and unaudited quarterly and fiscal year-end financial results for the period ended December 31, 2018 of Chemical (provided by Chemical);

 

   

the audited financial statements and the Annual Reports on Form 10-K for the three fiscal years ended December 31, 2017 of TCF;

 

   

the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2018, June 30, 2018 and September 30, 2018 of TCF;

 

   

certain draft and unaudited quarterly and fiscal year-end financial results for the period ended December 31, 2018 of TCF (provided by TCF);

 

   

certain regulatory filings of Chemical and TCF and their respective subsidiaries, including, as applicable, the quarterly reports on Form FRY-9C and quarterly call reports that were filed with respect to each quarter during the three-year period ended December 31, 2017 as well as the quarters ended March 31, 2018, June 30, 2018 and September 30, 2018;

 

   

certain other interim reports and other communications of Chemical and TCF to their respective shareholders; and

 

   

other financial information concerning the respective businesses and operations of Chemical and TCF that was furnished to KBW by Chemical and TCF or that KBW was otherwise directed to use for purposes of its analysis.

KBW’s consideration of financial information and other factors that it deemed appropriate under the circumstances or relevant to its analyses included, among others, the following:

 

   

the historical and current financial position and results of operations of Chemical and TCF;

 

   

the assets and liabilities of Chemical and TCF;

 

   

the nature and terms of certain other merger transactions and business combinations in the banking industry;

 

   

a comparison of certain financial and stock market information of Chemical and TCF with similar information for certain other companies, the securities of which were publicly traded;

 

   

publicly-available consensus “street estimates” of TCF, as well as assumed TCF long-term growth rates that were provided to KBW by TCF management, all of which information was discussed with KBW by Chemical management and TCF management and used and relied upon by KBW based on such discussions, at the direction of Chemical management and with the consent of the Chemical board of directors;

 

   

financial and operating forecasts and projections of Chemical that were prepared by Chemical management, provided to and discussed with KBW by Chemical management, and used and relied upon by KBW at the direction of Chemical management and with the consent of the Chemical board of directors; and

 

   

estimates regarding certain pro forma financial effects of the merger on Chemical (including, without limitation, the potential cost savings and related expenses expected to result or be derived from the merger) that were prepared by Chemical management, provided to and discussed with KBW by Chemical management, and used and relied upon by KBW at the direction of Chemical management and with the consent of the Chemical board of directors.

 

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At the request of the Chemical board of directors, KBW also reviewed, and used for certain of its analyses, financial and operating forecasts and projections of TCF with respect to 2019 that were prepared by TCF management and provided to and discussed with KBW by TCF management and publicly-available consensus “street estimates” of Chemical. KBW also performed such other studies and analyses as it considered appropriate and took into account its assessment of general economic, market and financial conditions and its experience in other transactions, as well as its experience in securities valuation and knowledge of the banking industry generally. KBW also participated in discussions that were held by the managements of Chemical and TCF regarding the past and current business operations, regulatory relations, financial condition and future prospects of their respective companies and such other matters as KBW deemed relevant to its inquiry.

In conducting its review and arriving at its opinion, KBW relied upon and assumed the accuracy and completeness of all of the financial and other information that was provided to it or that was publicly available and KBW did not independently verify the accuracy or completeness of any such information or assume any responsibility or liability for such verification, accuracy or completeness. KBW relied upon Chemical management as to the reasonableness and achievability of the publicly available consensus “street estimates” of Chemical, the assumed TCF long-term growth rates, the financial and operating forecasts and projections of Chemical, and the estimates regarding certain pro forma financial effects of the merger on Chemical (including, without limitation, the potential cost savings and related expenses expected to result or be derived from the merger), all as referred to above (and the assumptions and bases therefor). KBW assumed that all of the foregoing information was reasonably prepared and represented (or in the case of the publicly available consensus “street estimates” of TCF that such estimates were consistent with) the best currently available estimates and judgments of Chemical management and that the forecasts, projections and estimates reflected in all such information would be realized in the amounts and in the time periods estimated. In addition, in the case of financial and operating forecasts and projections of TCF with respect to 2019 provided by TCF management and used by KBW for certain of its analyses, KBW assumed that such forecasts and projections of TCF were reasonably prepared and represented the best currently available estimates and judgments of TCF management.

It is understood that the portion of the foregoing financial information of Chemical and TCF that was provided to and discussed with KBW was not prepared with the expectation of public disclosure and that all of the foregoing financial information (including the publicly available consensus “street estimates” of TCF and Chemical referred to above) was based on numerous variables and assumptions that are inherently uncertain (including, without limitation, factors related to general economic and competitive conditions) and, accordingly, actual results could vary significantly from those set forth in such information. KBW assumed, based on discussions with the respective managements of Chemical and TCF and with the consent of the Chemical board of directors, that all such information provided a reasonable basis upon which KBW could form its opinion and KBW expressed no view as to any such information or the assumptions or bases therefor. KBW relied on all such information without independent verification or analysis and did not in any respect assume any responsibility or liability for the accuracy or completeness thereof.

KBW also assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of either Chemical or TCF since the date of the last financial statements of each such entity that were made available to KBW and that KBW was directed to use. KBW is not an expert in the independent verification of the adequacy of allowances for loan and lease losses and KBW assumed, without independent verification and with Chemical’s consent, that the aggregate allowances for loan and lease losses for each of Chemical and TCF are adequate to cover such losses. In rendering its opinion, KBW did not make or obtain any evaluations or appraisals or physical inspection of the property, assets or liabilities (contingent or otherwise) of Chemical or TCF, the collateral securing any of such assets or liabilities, or the collectability of any such assets, nor did KBW examine any individual loan or credit files, nor did it evaluate the solvency, financial capability or fair value of Chemical or TCF under any state or federal laws, including those relating to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Because such estimates are inherently subject to uncertainty, KBW assumed no responsibility or liability for their accuracy.

 

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KBW assumed, in all respects material to its analyses:

 

   

the merger would be completed substantially in accordance with the terms set forth in the merger agreement (the final terms of which KBW assumed would not differ in any respect material to its analyses from the draft version of the merger agreement reviewed by KBW and referred to above), with no adjustments to the exchange ratio and with no other consideration or payments in respect of TCF common stock;

 

   

that any related transactions (including the subsidiary bank merger and Chemical’s issuance of subordinated debt, which we refer to as the Chemical debt issuance) would be completed substantially in accordance with the terms set forth in the merger agreement or as otherwise described to KBW by representatives of Chemical; the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement were true and correct;

 

   

each party to the merger agreement or any of the related documents would perform all of the covenants and agreements required to be performed by such party under such documents;

 

   

there were no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental approval for the merger or any related transaction and that all conditions to the completion of the merger and any related transactions would be satisfied without any waivers or modifications to the merger agreement or any of the related documents; and

 

   

in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the merger and any related transactions, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, would be imposed that would have a material adverse effect on the future results of operations or financial condition of Chemical, TCF or the pro forma entity, or the contemplated benefits of the merger, including without limitation the cost savings and related expenses expected to result or be derived from the merger.

KBW assumed that the merger would be consummated in a manner that complied with the applicable provisions of the Securities Act, the Exchange Act and all other applicable federal and state statutes, rules and regulations. KBW was further advised by representatives of Chemical that Chemical relied upon advice from its advisors (other than KBW) or other appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with respect to Chemical, TCF, the merger and any related transaction (including the subsidiary bank merger and the Chemical debt issuance), and the merger agreement. KBW did not provide advice with respect to any such matters. At Chemical’s direction, KBW gave effect to the occurrence of the Chemical debt issuance for purposes of certain of KBW’s analyses.

KBW’s opinion addressed only the fairness, from a financial point of view, as of the date of such opinion, of the exchange ratio in the merger to Chemical. KBW expressed no view or opinion as to any other terms or aspects of the merger or any term or aspect of any related transaction (including the subsidiary bank merger and the Chemical debt issuance), including without limitation, the form or structure of the merger or any such related transaction, the treatment of outstanding TCF preferred stock and other TCF securities in the merger, any consequences of the merger to Chemical, its shareholders, creditors or otherwise, or any terms, aspects, merits or implications of any employment, retention, consulting, termination, voting, support, shareholder or other agreements, arrangements or understandings contemplated or entered into in connection with the merger, any such related transaction, or otherwise. KBW’s opinion was necessarily based upon conditions as they existed and could be evaluated on the date of such opinion and the information made available to KBW through such date. Developments subsequent to the date of KBW’s opinion may have affected, and may affect, the conclusion reached in KBW’s opinion and KBW did not and does not have an obligation to update, revise or reaffirm its opinion. KBW’s opinion did not address, and KBW expressed no view or opinion with respect to:

 

   

the underlying business decision of Chemical to engage in the merger or enter into the merger agreement;

 

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the relative merits of the merger as compared to any strategic alternatives that are, have been or may be available to or contemplated by Chemical or the Chemical board of directors;

 

   

any business, operational or other plans with respect to TCF or the pro forma entity that might be then contemplated by Chemical or the Chemical board of directors or that might be implemented subsequent to the closing of the merger;

 

   

the fairness of the amount or nature of any compensation to any of Chemical’s officers, directors or employees, or any class of such persons, relative to any compensation to the holders of Chemical common stock or relative to the exchange ratio;

 

   

the effect of the merger or any related transaction (including the subsidiary bank merger and the Chemical debt issuance) on, or the fairness of the consideration to be received by, holders of any class of securities of Chemical, TCF or any other party to any transaction contemplated by the merger agreement;

 

   

the actual value of Chemical common stock to be issued in connection with the merger;

 

   

the prices, trading range or volume at which Chemical common stock or TCF common stock would trade following the public announcement of the merger or the prices, trading range or volume at which Chemical common stock would trade following the consummation of the merger;

 

   

any advice or opinions provided by any other advisor to any of the parties to the merger or any other transaction contemplated by the merger agreement; or

 

   

any legal, regulatory, accounting, tax or similar matters relating to Chemical, TCF, any of their respective shareholders, or relating to or arising out of or as a consequence of the merger or any other related transaction (including the subsidiary bank merger and the Chemical debt issuance), including whether or not the merger would qualify as a tax-free reorganization for United States federal income tax purposes.

In performing its analyses, KBW made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of KBW, Chemical and TCF. Any estimates contained in the analyses performed by KBW are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, KBW’s opinion was among several factors taken into consideration by the Chemical board of directors in making its determination to adopt the merger agreement and approve the merger. Consequently, the analyses described below should not be viewed as determinative of the decision of the Chemical board with respect to the fairness of the exchange ratio. The type and amount of consideration payable in the merger were determined through negotiation between Chemical and TCF and the decision of Chemical to adopt the merger agreement was solely that of the Chemical board of directors.

The following is a summary of the material financial analyses presented by KBW to the Chemical board of directors in connection with its opinion. The summary is not a complete description of the financial analyses underlying the opinion or the presentation made by KBW to the Chemical board of directors, but summarizes the material analyses performed and presented in connection with such opinion. The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex analytic process involving various determinations as to appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, KBW did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the

 

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significance and relevance of each analysis and factor. Accordingly, KBW believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion.

Implied Transaction Statistics for the Proposed Merger

For purposes of the financial analyses described below, KBW utilized an implied transaction value for the proposed merger of $21.58 per outstanding share of TCF common stock, or $3.5 billion in the aggregate, based on the 0.5081x exchange ratio in the proposed merger and the closing price of Chemical common stock on January 25, 2019. KBW reviewed with the Chemical board of directors, among other things, the following implied transaction statistics for the proposed merger, which (as indicated below) were based on preliminary historical financial information of TCF for fiscal year 2018 provided by TCF management and either earnings per common share (“EPS”) consensus “street estimates” for TCF or internal EPS estimates for TCF provided by TCF management:

 

Price / Tangible Book Value per Share

     1.61x     

Price / 2018 Earnings per Share

     12.4x     

Price / 2018 Core Earnings per Share

     11.4x     
     Based on
“Street”
Estimates
     Based on
Internal
Estimates(1)
 

Price / 2019 Earnings per Share

     11.2x        10.3x  

Price / 2020 Earnings per Share

     10.8x        9.7x  

 

(1)

Reviewed with the Chemical board of directors at the request of Chemical.

Chemical and TCF Selected Companies Analysis

Using publicly available information, KBW compared the financial performance, financial condition and market performance of Chemical and TCF to 23 major exchange-traded U.S. banks and thrifts with total assets between $15.0 billion and $30.0 billion. Merger targets were excluded from the selected companies.

The selected companies were as follows:

 

BancorpSouth Bank

Bank of Hawaii Corporation

Bank OZK

Cathay General Bancorp

Commerce Bancshares, Inc.

First Hawaiian, Inc.

Flagstar Bancorp, Inc.

Fulton Financial Corporation

Hancock Whitney Corporation

Hope Bancorp, Inc.

Investors Bancorp, Inc.

Old National Bancorp

  

PacWest Bancorp

Pinnacle Financial Partners, Inc.

Prosperity Bancshares, Inc.

Simmons First National Corporation

Texas Capital Bancshares, Inc.

UMB Financial Corporation

Umpqua Holdings Corporation

United Bankshares, Inc.

Washington Federal, Inc.

Webster Financial Corporation

Western Alliance Bancorporation

To perform this analysis, KBW used profitability and other financial information for the latest 12 months (“LTM”) available or as of the end of the most recent quarter available and market price information as

 

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of January 25, 2019. KBW also used 2019 and 2020 EPS estimates taken from publicly available consensus “street estimates” for Chemical, TCF and the selected companies. Certain financial data prepared by KBW, as referenced in the tables presented below, may not correspond to the data presented in Chemical’s or TCF’s historical financial statements, or the data prepared by J.P. Morgan presented under the section “— Opinion of TCF’s Financial Advisor,” as a result of the different periods, assumptions and methods used by KBW to compute the financial data presented.

KBW’s analysis showed the following concerning the financial performance of Chemical, TCF and the selected companies:

 

                   Selected Companies  
     Chemical      TCF      25th
Percentile
     Median      Average      75th
Percentile
 

LTM Core Return on Average Assets (%) (1)

     1.48        1.49        1.28        1.34        1.42        1.52  

LTM Core Return on Average Equity (%) (1)

     10.88        13.57        9.80        10.58        11.48        12.96  

LTM Core Return on Average Tangible Common Equity (%) (1)

     18.92        14.74        14.67        17.06        16.75        18.86  

LTM Net Interest Margin (%)

     3.48        4.63        3.23        3.54        3.63        3.77  

LTM Fee Income / Revenue Ratio (%) (2)

     19.0        32.0        10.7        21.5        20.5        25.6  

LTM Efficiency Ratio (%)

     51.6        67.3        58.3        53.1        53.5        46.7  

 

(1)

Core income excluded extraordinary items, gains/(losses) on sale of securities, nonrecurring revenue/expenses, and amortization of intangibles as calculated by S&P Global Market Intelligence; where applicable, adjusted for deferred tax asset revaluation due to the Tax Cuts and Jobs Act in the fourth quarter of 2017.

(2)

Excluded gains/(losses) on sale of securities.

KBW’s analysis also showed the following concerning the financial condition of Chemical, TCF and the selected companies:

 

                   Selected Companies  
     Chemical      TCF      25th
Percentile
     Median      Average      75th
Percentile
 

Tangible Common Equity / Tangible Assets (%)

     8.23        9.32        8.32        9.12        9.32        10.06  

Total Capital Ratio (%)

     11.50        13.38        12.73        13.40        13.68        14.46  

Loans / Deposits (%)

     97.9        100.9        80.5        93.9        89.7        97.7  

Loan Loss Reserve / Gross Loans (%)

     0.72        0.83        0.72        0.86        0.85        1.03  

Non-performing assets / Loans + OREO (%)

     0.90        1.19        1.20        0.62        0.83        0.49  

LTM Net Charge-offs / Average Loans (%)

     0.09        0.29        0.26        0.16        0.16        0.06  

 

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In addition, KBW’s analysis showed the following concerning the market performance of Chemical, TCF and the selected companies:

 

                 Selected Companies  
     Chemical     TCF     25th
Percentile
    Median     Average     75th
Percentile
 

1 – Year Stock Price Change (%)

     (27.9     (2.0     (20.4     (15.9     (16.1     (10.3

YTD Stock Price Change (%)

     16.0       10.7       10.7       13.6       14.2       16.7  

1-Year Total Return (%)

     (26.1     0.5       (19.1     (14.1     (14.1     (7.6

Stock Price / Tangible Book Value per Share (x)

     1.81       1.61       1.52       1.77       1.85       2.12  

Stock Price / LTM EPS (x)(1)

     10.8       12.4       10.9       12.0       12.6       14.3  

Stock Price / 2019 Consensus Est. EPS (x) (2)

     10.3       11.2       10.4       11.7       11.8       13.8  

Stock Price / 2020 Consensus Est. EPS (x)

     9.7       10.8       9.7       11.0       11.2       13.0  

Dividend Yield (%)

     3.2       2.8       2.0       2.7       2.6       3.5  

2019 Est. Dividend Payout (%) (2)

     33.0       31.2       25.1       31.9       31.6       41.9  

 

(1)

Where applicable, LTM EPS was adjusted for deferred tax asset revaluation due to the Tax Cuts and Jobs Act in the fourth quarter of 2017.

(2)

Chemical’s price to 2019 estimated EPS multiple would be 10.3x based on the internal estimate for Chemical provided by Chemical management, and TCF’s price to 2019 estimated EPS multiple would be 10.3x based on the internal estimate for TCF provided by TCF management.

No company used as a comparison in the above selected companies analysis is identical to Chemical or TCF. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Relative Contribution Analysis

KBW analyzed the relative standalone contribution of Chemical and TCF to various pro forma balance sheet and income statement items of the combined entity. This analysis did not include purchase accounting adjustments or synergies. To perform this analysis, KBW used (i) preliminary historical balance sheet data for Chemical and TCF as of December 31, 2018 provided by Chemical and TCF management, respectively, (ii) publicly available consensus “street estimates” of TCF, (iii) Chemical financial forecasts provided by Chemical management and (iv) market price data as of January 25, 2019. The results of KBW’s analysis are set forth in the following table, which also compares the results of KBW’s analysis with the implied pro forma ownership percentages of Chemical and TCF shareholders in the combined company based on the 0.5081x exchange ratio in the proposed merger:

 

     Chemical
as a % of
Total
    TCF
as a % of
Total
 

Ownership

    

At 0.5081x Merger Exchange Ratio

     46.2     53.8

Balance Sheet

    

Assets

     47.6     52.4

Gross Loans Held for Inv.

     44.5     55.5

Deposits

     45.2     54.8

Tangible Common Equity

     43.3     56.7

Income Statement

    

2018 GAAP Net Income to Common

     49.5     50.5

2019 Est. GAAP Net Income to Common

     49.0     51.0

2020 Est. GAAP Net Income to Common

     49.6     50.4

 

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At the request of Chemical, KBW also reviewed the relative standalone contribution of Chemical and TCF to the 2019 and 2020 estimated net income of the combined entity based on financial forecasts and projections of Chemical and TCF provided by Chemical management and TCF management, respectively:

 

     Chemical
as a % of
Total
    TCF
as a % of
Total
 
    

2019 Est. Net Income

     47.6     52.4

2020 Est. Net Income

     47.6     52.4

Pro Forma Financial Impact Analysis

KBW performed a pro forma financial impact analysis that combined projected income statement and balance sheet information of Chemical and TCF. Using pro forma assumptions (including, without limitation, the cost savings and related expenses expected to result from the merger, certain accounting adjustments and restructuring charges assumed with respect thereto) provided by Chemical management, KBW analyzed the estimated financial impact of the merger on certain projected financial results. Based on publicly available consensus “street estimates” of Chemical and TCF and assumed long-term growth rates provided by Chemical management and TCF management, respectively, this analysis indicated that the merger could be accretive to Chemical’s 2020 estimated EPS by approximately 7.1% (and by approximately 17.2% assuming a full phase-in of all annual pre-tax merger-related cost savings in 2020) and could be accretive to Chemical’s 2021 estimated EPS by approximately 18.4%. Additionally, based on financial forecasts and projections of Chemical and TCF provided by Chemical management and TCF management, respectively, this analysis also indicated that the merger could be accretive to Chemical’s 2020 estimated EPS by approximately 15.2% (and by approximately 24.8% assuming a full phase-in of all annual pre-tax merger-related cost savings in 2020) and could be accretive to Chemical’s 2021 estimated EPS by approximately 26.8%. Furthermore, based on closing balance sheet estimates as of September 30, 2019 for Chemical and TCF, extrapolated from historical data using growth rates taken from publicly available consensus “street estimates” of Chemical and TCF, this analysis indicated that (a) the merger could be dilutive to Chemical’s estimated tangible book value per share at closing as of September 30, 2019 by approximately 7.9% and (b) pro forma for the merger, each of Chemical’s tangible common equity to tangible assets ratio, Leverage Ratio, Common Equity Tier 1 Ratio, Tier 1 Risk-Based Capital Ratio and Total Risk-Based Capital Ratio could be lower at closing as of September 30, 2019. For all of the above analysis, the actual results achieved by the combined company following the merger may vary from the projected results, and the variations may be material.

TCF Discounted Cash Flow Analysis

KBW performed a discounted cash flow analysis to estimate a range for the implied equity value of TCF. In this analysis, KBW used publicly available consensus “street estimates” of TCF and assumed TCF long-term growth rates provided by TCF management, and KBW assumed discount rates ranging from 11.0% to 13.0%. This range of discount rates assumed in this analysis was selected taking into account capital asset pricing model implied cost of capital calculations and other factors based on KBW’s experience and judgment. The range of values was derived by adding (i) the present value of the estimated excess cash flows that TCF could generate over the 4.25-year period from the fourth quarter of 2019 through 2023 and (ii) the present value of TCF’s implied terminal value at the end of such period. KBW assumed that TCF would maintain a tangible common equity to tangible assets ratio of 8.00% and TCF would retain sufficient earnings to maintain that level. Estimates of excess cash flows were calculated generally as any portion of estimated earnings in excess of the amount assumed to be retained by TCF to maintain the assumed tangible common equity to tangible assets ratio. In calculating the terminal value of TCF, KBW applied a range of 10.0x to 15.0x TCF’s estimated 2024 earnings, which range was selected by KBW based on factors which KBW considered appropriate based on its experience and judgment. This discounted cash flow analysis resulted in a range of implied values per share of TCF common stock of $20.37 per share to $28.19 per share.

 

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The discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including asset and earnings growth rates, terminal values, dividend payout rates and discount rates. The above analysis did not purport to be indicative of the actual values or expected values of TCF.

Chemical Discounted Cash Flow Analysis

KBW performed a discounted cash flow analysis to estimate a range for the implied equity value of Chemical. In this analysis, KBW used financial and operating forecasts and projections relating to the earnings and assets of Chemical provided by Chemical management, and KBW assumed discount rates ranging from 11.0% to 13.0%. This range of discount rates assumed in this analysis was selected taking into account capital asset pricing model implied cost of capital calculations and other factors based on KBW’s experience and judgment. The range of values was derived by adding (i) the present value of the estimated excess cash flows that Chemical could generate over the 4.25-year period from the fourth quarter of 2019 through 2023 and (ii) the present value of Chemical’s implied terminal value at the end of such period. KBW assumed that Chemical would maintain a tangible common equity to tangible assets ratio of 8.00% and Chemical would retain sufficient earnings to maintain that level. Estimates of excess cash flows were calculated generally as any portion of estimated earnings in excess of the amount assumed to be retained by Chemical to maintain the assumed tangible common equity to tangible assets ratio. In calculating the terminal value of Chemical, KBW applied a range of 10.0x to 15.0x Chemical’s estimated 2024 earnings, which range was selected by KBW based on factors which KBW considered appropriate based on its experience and judgment. This discounted cash flow analysis resulted in a range of implied values per share of Chemical common stock of $40.52 per share to $57.90 per share.

The discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including asset and earnings growth rates, terminal values, dividend payout rates and discount rates. The above analysis did not purport to be indicative of the actual values or expected values of Chemical.

Illustrative Pro Forma Combined Discounted Cash Flow Analysis

KBW performed a discounted cash flow analysis to estimate an illustrative range for the implied equity value of the pro forma combined entity, taking into account the cost savings and related expenses expected to result from the merger as well as certain accounting adjustments and restructuring charges assumed with respect thereto. In this analysis, KBW used publicly available consensus “street estimates” of net income to common for Chemical and TCF, assumed growth rates for Chemical and TCF provided by Chemical management and TCF management, respectively, and estimated cost savings and related expenses and accounting adjustments and restructuring charges provided by Chemical management, and KBW assumed discount rates ranging from 10.5% to 12.5%. This range of discount rates assumed in this analysis was selected taking into account capital asset pricing model implied cost of capital calculations and other factors based on KBW’s experience and judgment. The range of values was derived by adding (i) the present value of the estimated excess cash flows that the pro forma combined entity could generate over the 4.25-year period from the fourth quarter of 2019 through 2023 and (ii) the present value of the pro forma combined entity’s implied terminal value at the end of such period, in each case applying estimated cost savings and related expenses and accounting adjustments and restructuring charges. KBW assumed that the pro forma combined entity would maintain a tangible common equity to tangible assets ratio of 8.00% and would retain sufficient earnings to maintain that level. Estimates of excess cash flows were calculated generally as any portion of estimated earnings in excess of the amount assumed to be retained by the pro forma combined entity to maintain the assumed tangible common equity to tangible assets ratio. In calculating the terminal value of the pro forma combined entity, KBW applied a range of 10.0x to 15.0x the pro forma combined entity’s estimated 2024 earnings, which range was selected by KBW based on factors which KBW considered appropriate based on its experience and judgment. This discounted cash flow analysis resulted in an illustrative range of implied values per share of the pro forma combined entity’s common stock of $46.09 per share to $66.28 per share.

 

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The discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including asset and earnings growth rates, terminal values, dividend payout rates and discount rates. The above analysis did not purport to be indicative of the actual values or expected values of the pro forma combined entity.

Miscellaneous

KBW acted as financial advisor to Chemical in connection with the proposed merger and did not act as an advisor to or agent of any other person. As part of its investment banking business, KBW is continually engaged in the valuation of bank and bank holding company securities in connection with acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. As specialists in the securities of banking companies, KBW has experience in, and knowledge of, the valuation of banking enterprises. KBW and its affiliates, in the ordinary course of its and their broker-dealer businesses (and further to existing sales and trading relationships between Chemical and each of KBW and a KBW broker-dealer affiliate), may from time to time purchase securities from, and sell securities to, Chemical and TCF. In addition, as market makers in securities, KBW and its affiliates may from time to time have a long or short position in, and buy or sell, debt or equity securities of Chemical or TCF for its and their own accounts and for the accounts of its and their respective customers and clients.

Pursuant to the KBW engagement agreement, Chemical has agreed to pay KBW a total cash fee currently estimated to be approximately $26.4 million, $2.5 million of which became payable with the rendering of KBW’s opinion and the balance of which is contingent upon the closing of the merger. Chemical also agreed to reimburse KBW for reasonable out-of-pocket expenses and disbursements incurred in connection with its engagement and to indemnify KBW against certain liabilities relating to or arising out of KBW’s engagement or KBW’s role in connection therewith. Other than in connection with the present engagement, in the two years preceding the date of KBW’s opinion, KBW did not provide investment banking or financial advisory services to Chemical. In the two years preceding the date of KBW’s opinion, KBW did not provide investment banking or financial advisory services to TCF. KBW may in the future provide investment banking and financial advisory services to Chemical or TCF and receive compensation for such services.

Opinion of TCF’s Financial Advisor

Pursuant to an engagement letter dated January 27, 2019, TCF retained J.P. Morgan as one of its financial advisors in connection with the proposed merger.

At the meeting of the TCF board of directors on January 27, 2019, J.P. Morgan rendered its oral opinion to the TCF board of directors, subsequently confirmed in writing, that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to the holders of TCF’s common stock.

The full text of the J.P. Morgan opinion, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex C to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of the J.P. Morgan opinion set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. TCF’s shareholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the TCF board of directors (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed merger, was directed only to the exchange ratio in the merger and did not address any other aspect of the merger. J.P. Morgan expressed no opinion as to the fairness of the exchange ratio to the holders of any class of securities, creditors or other constituencies of TCF or as to the underlying decision by TCF to engage in the proposed merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The summary of the J.P. Morgan opinion set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion.

 

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The opinion does not constitute a recommendation to any shareholder of TCF as to how such shareholder should vote with respect to the proposed merger or any other matter.

In arriving at its opinion, J.P. Morgan, among other things:

 

   

reviewed a draft dated January 25, 2019 of the merger agreement;

 

   

reviewed certain publicly available business and financial information concerning TCF and Chemical and the industries in which they operate;

 

   

compared the financial and operating performance of TCF and Chemical with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of TCF common stock and Chemical common stock and certain publicly traded securities of such other companies;

 

   

reviewed certain internal financial analyses and forecasts prepared by the managements of TCF and Chemical relating to their respective businesses, as well as the estimated amount and timing of cost savings and related expenses and synergies expected to result from the merger (which we refer to as the “synergies”); and

 

   

performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.

In addition, J.P. Morgan held discussions with certain members of management of TCF and Chemical with respect to certain aspects of the merger, and the past and current business operations of TCF and Chemical, the financial condition and future prospects and operations of TCF and Chemical, the effects of the merger on the financial condition and future prospects of TCF and Chemical, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.

In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by TCF and Chemical or otherwise reviewed by or for J.P. Morgan, and J.P. Morgan did not independently verify (and did not assume responsibility or liability for independently verifying) any such information or its accuracy or completeness. J.P. Morgan did not conduct or was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of TCF or Chemical under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom (including the synergies), J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of TCF and Chemical to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts (including the synergies) or the assumptions on which they were based. J.P. Morgan also assumed that the merger and the other transactions contemplated by the merger agreement will qualify as a tax-free reorganization for United States federal income tax purposes, and will be consummated as described in the merger agreement, and that the definitive merger agreement would not differ in any material respect from the draft thereof provided to J.P. Morgan. J.P. Morgan also assumed that the representations and warranties made by TCF and Chemical in the merger agreement and the related agreements were and will be true and correct in all respects material to its analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to TCF with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on TCF or Chemical or on the contemplated benefits of the merger.

The J.P. Morgan opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. The J.P. Morgan opinion noted that subsequent developments may affect the J.P. Morgan opinion, and that J.P. Morgan does not have any

 

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obligation to update, revise or reaffirm such opinion. The J.P. Morgan opinion is limited to the fairness, from a financial point of view, to the holders of TCF common stock of the exchange ratio in the proposed merger, and J.P. Morgan has expressed no opinion as to the fairness of any consideration to the holders of any other class of securities, creditors or other constituencies of TCF or the underlying decision by TCF to engage in the merger. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors or employees of any party to the proposed merger, or any class of such persons relative to the exchange ratio in the proposed merger or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which TCF’s common stock or Chemical’s common stock will trade at any future time.

The terms of the merger agreement, including the exchange ratio, were determined through arm’s length negotiations between TCF and Chemical, and the decision to enter into the merger agreement was solely that of TCF’s board of directors and Chemical’s board of directors. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by TCF’s board of directors in its evaluation of the proposed merger and should not be viewed as determinative of the views of TCF’s board of directors or management with respect to the proposed merger or the exchange ratio.

In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodology in rendering its opinion to TCF’s board of directors on January 27, 2019 and contained in the presentation delivered to TCF’s board of directors on such date in connection with the rendering of such opinion and does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses.

TCF Public Trading Multiples Analysis

Using publicly available information, J.P. Morgan compared selected financial and market data of TCF with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be analogous to TCF’s business, including the following selected companies (which we refer to as the “TCF selected regional banks”):

 

   

Associated Banc-Corp

 

   

BOK Financial Corporation

 

   

Chemical Financial Corporation

 

   

First Midwest Bancorp, Inc.

 

   

Great Western Bancorp, Inc.

 

   

Old National Bancorp

 

   

Umpqua Holdings Corporation

 

   

Wintrust Financial Corporation

Multiples were based on closing stock prices on January 25, 2019, which was the last practicable day prior to the delivery of the J.P. Morgan opinion. For each of the following analyses performed by J.P. Morgan, financial and market data for the TCF selected regional banks were based on the TCF selected regional banks’ public filings and information J.P. Morgan obtained from SNL Financial and FactSet Research Systems. The multiples and ratios for each of the TCF selected regional banks were based on the most recent publicly available information as of January 25, 2019.

 

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None of the TCF selected regional banks reviewed is identical to TCF. Certain of these companies may have characteristics that are materially different from those of TCF. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies differently than they would affect TCF. However, the companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analyses, may be considered similar to those of TCF.

For TCF and each TCF selected regional bank, publicly available financial performance for the most recent publicly reported fiscal quarter was measured. With respect to TCF and the TCF selected regional banks, the information J.P. Morgan presented included:

 

   

multiple of price to estimated 2019 earnings per share (which we refer to as “P / FY 2019E EPS”); and

 

   

a regression analysis to review the relationship between (i) the multiple of price to tangible book value (which we refer to as “P / TBV”) and (ii) the estimated 2019 return on average tangible common equity (which we refer to as “FY 2019E ROATCE”) based on available estimates obtained from public filings and FactSet Research Systems

Based on the results of this analysis and other factors which J.P. Morgan considered appropriate based on its experience and judgment, J.P. Morgan selected multiple reference ranges for TCF as follows:

 

     Range  

P / FY 2019E EPS

     10.3x – 12.2x  

P / TBV

     1.7x – 1.8x  

Based on the above analysis, J.P. Morgan then applied a multiple reference range of 10.3x to 12.2x for P /FY 2019E EPS to TCF management’s estimate of TCF’s earnings per share for the fiscal year 2019 of $2.10. J.P. Morgan also applied a multiple reference range of 1.7x to 1.8x for P / TBV, which it derived from TCF’s management estimate of 2019 ROATCE of 15.3%, to TCF’s tangible book value per share of $13.38 as of December 31, 2018.

After applying these ranges to TCF’s estimated 2019 earnings per share and TCF’s tangible book value per share as of December 31, 2018, J.P. Morgan’s analysis indicated the following implied equity value per share ranges for the shares of TCF common stock, rounded to the nearest $0.01 per share of TCF common stock, as compared to the implied consideration of $21.58 per share of TCF common stock (which we refer to as the “assumed consideration”), which was calculated based on the product of (x) the fixed exchange ratio provided in the merger agreement of 0.5081 and (y) a closing stock price of Chemical’s common stock on January 25, 2019 of $42.47:

 

     Implied Equity
Value Per Share
 
     Low      High  

P / FY 2019E EPS

   $ 21.65      $ 25.55  

P / TBV

   $  23.03      $ 24.34  

TCF Dividend Discount Analysis

J.P. Morgan calculated a range of implied values for TCF common stock by discounting to present value estimates of TCF’s future dividend stream and terminal value. In performing its analysis, J.P. Morgan utilized, among others, the following assumptions, which were reviewed and approved by TCF management:

 

   

earnings and asset assumptions based on TCF management’s forecast for fiscal year 2019 and assumptions provided by TCF management for extrapolations thereafter (which we refer to as the TCF internal forecast);

 

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a December 31, 2018 valuation date;

 

   

a five-year dividend discount model;

 

   

a terminal value based on estimated 2024 net income (which was based on the TCF internal forecast), multiplied by a next twelve months price to earnings ratio (which we refer to as NTM P/E) multiple range of 10.0x to 12.0x, which range was selected by J.P. Morgan based on factors which J.P. Morgan considered appropriate based on its experience and judgment;

 

   

discount rates from 9.0% to 11.0% representing TCF’s cost of equity, which range was chosen by J.P. Morgan taking into account macroeconomic assumptions, estimates of risk, TCF’s capital structure and other appropriate factors based on its experience and judgment;

 

   

a target Tier 1 common equity ratio of 10.0% (and with capital in excess of this target paid as dividends), as provided by TCF management ;

 

   

a cost of excess capital of 2.50% (pre-tax), as provided by TCF management;

 

   

a 21.0% marginal tax rate, as provided by TCF management;

 

   

a mid-year convention; and

 

   

an estimated 163.9 million fully diluted shares of TCF common stock outstanding as of December 31, 2018, as provided by TCF management.

Based on the TCF internal forecast and using a range of discount rates from 9.0% to 11.0%, reflecting estimates of TCF’s cost of equity as described above, J.P. Morgan discounted the estimated dividend streams from TCF for the period of 2019 through 2024 and the range of terminal values to derive present values, as of December 31, 2018, of TCF.

This analysis implied an equity value per share of $21.30 to $25.84 per share of TCF common stock as of December 31, 2018, based on the 163.9 million fully diluted shares of TCF common stock outstanding as compared to the assumed consideration of $21.58 per share of TCF common stock, as illustrated by the following table:

 

Discount Rate

   Terminal Multiple NTM P/E  
     10.0x      11.0x      12.0x  

9.0%

   $ 22.90      $ 24.37      $ 25.84  

10.0%

   $ 22.08      $ 23.49      $ 24.89  

11.0%

   $ 21.30      $ 22.65      $ 23.99  

Chemical Public Trading Multiples Analysis

Using publicly available information, J.P. Morgan compared selected financial and market data of Chemical with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be analogous to Chemical’s business, including the following selected companies, which we refer to as the Chemical selected regional banks:

 

   

Associated Banc-Corp

 

   

BOK Financial Corporation

 

   

First Midwest Bancorp, Inc.

 

   

Great Western Bancorp, Inc.

 

   

Old National Bancorp

 

   

TCF Financial Corporation

 

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Umpqua Holdings Corporation

 

   

Wintrust Financial Corporation

Multiples were based on closing stock prices on January 25, 2019, which was the last practicable day prior to the delivery of the J.P. Morgan opinion. For each of the following analyses performed by J.P. Morgan, financial and market data for the Chemical selected regional banks were based on the Chemical selected regional banks’ public filings and information J.P. Morgan obtained from SNL Financial and FactSet Research Systems. The multiples and ratios for each of the Chemical selected regional banks were based on the most recent publicly available information as of January 25, 2019.

None of the Chemical selected regional banks reviewed is identical to Chemical. Certain of these companies may have characteristics that are materially different from those of Chemical. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies differently than they would affect Chemical. However, the companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analyses, may be considered similar to those of Chemical.

For Chemical and each Chemical selected regional bank, publicly available financial performance for the most recent publicly reported fiscal quarter was measured. With respect to Chemical and the Chemical selected regional banks, the information J.P. Morgan presented included:

 

   

P / FY 2019E EPS; and

 

   

a regression analysis to review (i) P / TBV and (ii) FY 2019E ROATCE based on available estimates obtained from public filings and FactSet Research Systems.

Based on the results of this analysis and other factors which J.P. Morgan considered appropriate based on its experience and judgment, J.P. Morgan selected multiple reference ranges for Chemical as follows:

 

     Range  

P / FY 2019E EPS

     10.3x – 12.2x  

P / TBV

     1.9x – 2.0x  

Based on the above analysis, J.P. Morgan then applied a multiple reference range of 10.3x to 12.2x for P / FY 2019E EPS to Chemical management’s estimate of Chemical’s earnings per share for the fiscal year 2019 of $4.14. J.P. Morgan also applied a multiple reference range of 1.9x to 2.0x for P / TBV, which it derived from Chemical’s management estimate of 2019 ROATCE of 17.1%, to Chemical’s tangible book value per share of $23.54 as of December 31, 2018.

After applying these ranges to Chemical’s estimated 2019 earnings per share and Chemical’s tangible book value per share as of December 31, 2018, J.P. Morgan’s analysis indicated the following implied equity value per share ranges for the shares of Chemical common stock, rounded to the nearest $0.01 per share of Chemical common stock, as compared to the closing stock price of Chemical’s common stock on January 25, 2019 of $42.47:

 

     Implied Equity
Value Per Share
 
     Low      High  

P / FY 2019E EPS

   $ 42.67      $ 50.37  

P / TBV

   $ 44.69      $ 46.99  

 

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Chemical Dividend Discount Analysis

J.P. Morgan calculated a range of implied values for Chemical common stock by discounting to present value estimates of Chemical’s future dividend stream and terminal value. In performing its analysis, J.P. Morgan utilized, among others, the following assumptions, which were reviewed and approved by TCF management:

 

   

earnings and asset assumptions based on Chemical management’s forecast for fiscal year 2019 and assumptions provided by Chemical management for extrapolations thereafter (which we refer to as the Chemical internal forecast), used at the direction of TCF management;

 

   

a December 31, 2018 valuation date;

 

   

a five-year dividend discount model;

 

   

a terminal value based on estimated 2024 net income (which was based on the Chemical internal forecast), which were used at the direction of TCF management, multiplied by a NTM P/E multiple range of 10.0x to 12.0x, which range was selected by J.P. Morgan based on factors which J.P. Morgan considered appropriate based on its experience and judgment;

 

   

discount rates from 9.0% to 11.0% representing Chemical’s cost of equity, which range was chosen by J.P. Morgan taking into account macroeconomic assumptions, estimates of risk, Chemical’s capital structure and other appropriate factors based on its experience and judgment;

 

   

a target Tier 1 common equity ratio of 10.0% (and with capital in excess of this target paid as dividends), as provided by TCF management;

 

   

a cost of excess capital of 2.50% (pre-tax), as provided by TCF management;

 

   

a 21.0% marginal tax rate, as provided by TCF management;

 

   

a mid-year convention; and

 

   

an estimated 71.6 million fully diluted shares of Chemical common stock outstanding as of December 31, 2018, as provided by Chemical management.

Based on the Chemical internal forecast and using a range of discount rates from 9.0% to 11.0%, reflecting estimates of Chemical’s cost of equity as described above, J.P. Morgan discounted the estimated dividend streams from Chemical for the period of 2019 through 2024 and the range of terminal values to derive present values, as of December 31, 2018, of Chemical.

This analysis implied an equity value per share of $42.40 to $51.59 per share of Chemical common stock as of December 31, 2018, based on the 71.6 million fully diluted shares of Chemical common stock outstanding as compared to the closing stock price of Chemical’s common stock on January 25, 2019 of $42.47, as illustrated by the following table:

 

Discount Rate

   Terminal Multiple NTM P/E  
     10.0x      11.0x      12.0x  

9.0%

   $ 45.63      $ 48.61      $ 51.59  

10.0%

   $ 43.97      $ 46.82      $ 49.67  

11.0%

   $ 42.40      $ 45.12      $ 47.84  

Relative Value Analysis

Based upon the implied valuations for each of TCF and Chemical calculated pursuant to the trading multiples analyses and standalone dividend discount analyses described above, J.P. Morgan calculated a range of implied exchange ratios of a share of Chemical common stock to a share of TCF common stock, and then compared that range of implied exchange ratios to the exchange ratio in the merger of 0.5081 shares of Chemical common stock per share of TCF common stock.

 

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For each of the analyses referred to above, J.P. Morgan calculated the ratio implied by dividing the low end of each implied equity value of TCF by the high end of each implied equity value of Chemical. J.P. Morgan also calculated the ratio implied by dividing the high end of each implied equity value of TCF by the low end of each implied equity value of Chemical. J.P. Morgan assumed, in each case, that 100% of the merger consideration would be stock consideration.

This analysis indicated the following implied exchange ratios, compared in each case to the exchange ratio in the merger of 0.5081 shares of Chemical common stock per share of TCF common stock:

 

Comparison    Range of Implied
Exchange Ratios
 

Public Trading Multiples Analysis

  

2019E P/E

     0.4298 – 0.5989  

P / TBV

     0.4900 – 0.5447  

Dividend Discount Analysis

     0.4129 – 0.6095  

Value Creation Analysis

J.P. Morgan prepared a value creation analysis that compared the equity value of TCF (based on the dividend discount analysis) to the pro forma combined company equity value. J.P. Morgan determined the pro forma combined company equity value by calculating the sum of (i) the equity value of TCF using the midpoint value determined in J.P. Morgan’s dividend discount analysis described above in “—TCF Dividend Discount Analysis”, (ii) the equity value of Chemical using the midpoint value determined in J.P. Morgan’s dividend discount analysis described above in “—Chemical Dividend Discount Analysis” and (iii) the estimated present value of expected synergies, net of restructuring charges. There can be no assurance that the synergies and transaction-related expenses will not be substantially greater or less than the TCF estimate described above. The value creation analysis at the exchange ratio of 0.5081x provided for in the merger yielded accretion to the holders of TCF common stock of 17%.

Certain Other Information

J.P. Morgan also reviewed the implied historical exchange ratios during the period beginning on November 8, 2016 (the date of the most recent U.S. presidential election) and ending on January 25, 2019, which were calculated by dividing the daily closing price per share of TCF common stock by that of Chemical common stock, noting that the range of exchange ratios during such period was 0.3144x to 0.5324x, as compared to the exchange ratio in the proposed merger of 0.5081x.

Miscellaneous

The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of TCF or Chemical. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.

 

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Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the TCF selected regional banks or Chemical selected regional banks reviewed as described in the above summary is identical to TCF or Chemical. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of TCF and Chemical. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to TCF and Chemical.

As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise TCF with respect to the merger on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with TCF and Chemical and the industries in which they operate.

For financial advisory services rendered in connection with the merger, TCF has agreed to pay J.P. Morgan an estimated fee of approximately $26 million, of which $5 million became payable at the time J.P. Morgan delivered its opinion to TCF’s board of directors. In addition, TCF has agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement. During the two years preceding the date of the J.P. Morgan opinion, neither J.P. Morgan nor any of its affiliates have had any other material commercial or investment banking relationships with TCF or Chemical.

During the two year period preceding the date of the J.P. Morgan opinion, the aggregate fees received by J.P. Morgan from TCF were approximately $0.9 million, and J.P. Morgan received no fees from Chemical during such period. In addition, J.P. Morgan and its affiliates hold, on a proprietary basis, less than 1% of each of the outstanding TCF common stock and Chemical common stock. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities or other financial instruments (including derivatives, bank loans or other obligations) of TCF or Chemical for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities or other financial instruments.

Interests of Chemical Directors and Executive Officers in the Merger

In considering the recommendation of the Chemical board of directors with respect to the merger, Chemical shareholders should be aware that certain of Chemical’s directors and executive officers have interests in the merger, including financial interests, that may be different from, or in addition to, the interests of the other shareholders of Chemical generally. The Chemical board of directors was aware of and considered these interests during its deliberations of the merits of the merger and in determining to recommend to Chemical shareholders that they vote for the Chemical merger proposal and thereby approve the transactions contemplated by the merger agreement, including the merger. See the sections entitled “— Background of the Merger” and “—Recommendation of the Chemical Board of Directors and Reasons for the Merger” of this joint proxy statement/prospectus. These interests are described in more detail below, and certain of them are quantified in the narrative and table below.

 

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Treatment of Outstanding Chemical Equity Awards

All outstanding stock options, performance-based restricted stock units and time-vesting restricted stock units of Chemical, which we refer to as the Chemical equity awards, which are outstanding immediately before the effective time of the merger will continue to be awards in respect of Chemical common stock following the merger, subject to the same terms and conditions that were applicable to such awards before the effective time, except with respect to performance-based restricted stock units. Because the merger will constitute a change in control for purposes of the Chemical equity awards, the performance-based restricted stock units for which performance results have not been measured will be measured as of the latest practicable date before the closing of the merger and the number of performance-based restricted stock units will be fixed at the greater of the target (100%) performance level or actual performance, which we refer to as the “Chemical Earned Awards,” and such Chemical Earned Awards will continue to vest based on the executive’s continued service through the end of the applicable performance period.

The Chemical equity award agreements and any employment or change in control agreement governing the treatment of such awards (if applicable) each include “double-trigger” vesting if the executive is terminated by Chemical without cause or if the executive terminates his or her employment for good reason following a change in control, each a “qualifying termination.” Accordingly, if the executive experiences a qualifying termination following the closing of the merger, all unvested stock options and time-vesting restricted stock units will fully vest, and all Chemical Earned Awards in respect of the performance-based restricted stock units will also fully vest.

For an estimate of the amounts that would be payable to each of Chemical’s named executive officers upon a qualifying termination event in settlement of their unvested Chemical equity awards, see “Merger-Related Compensation for Chemical’s Named Executive Officers” below. The estimated aggregate amount that would be realized by the nine Chemical executive officers who are not named executive officers in settlement of their unvested Chemical equity awards that were outstanding on May 1, 2019 (excluding associated dividend equivalent rights accrued thereon) if the merger were to be completed on May 1, 2019 and the executive experienced a qualifying termination on that date is $4,130,674. This amount was calculated using a price per share of Chemical common stock of $44.73 (the average closing price of Chemical common stock on the first five business days following the announcement of the merger) and, in the case of performance-based restricted stock units, assumed target performance.

Existing Chemical Employment Agreements

Chemical has existing employment agreements with the following named executive officers: David Provost, Gary Torgow, Dennis Klaeser, Thomas Shafer and J. Brennan Ryan.

Employment Agreements with Mr. Provost and Mr. Torgow. On January 27, 2019, each of Mr. Provost and Mr. Torgow entered into retention agreements with Chemical, as described below, which will become effective on the closing date of the merger, and will supersede their existing employment agreements dated February 27, 2018. Neither the current employment agreement between Chemical and each of Mr. Provost and Mr. Torgow, nor the January 27, 2019 retention agreement between Chemical and each of Mr. Provost and Mr. Torgow, contain any severance payments related specifically to a change in control, although each agreement includes severance payments and benefits in the event either executive is terminated without cause by Chemical or if he terminates his employment for good reason.

 

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Employment Agreements with Mr. Klaeser, Mr. Shafer and Mr. Ryan. Under Chemical’s employment agreements with each of Mr. Klaeser, Mr. Shafer and Mr. Ryan, the merger will constitute a change in control. Under each employment agreement, if the executive is terminated by Chemical without cause, or with respect to Mr. Klaeser and Mr. Ryan, if the executive terminates his employment for good reason, each within six months before or two years following a change in control, we will pay each executive:

 

   

a lump sum cash severance payment in the amount of two times the executive’s then current base salary (disregarding any reduction in base salary due to a good reason termination, if applicable) plus the average of the executive’s cash bonuses under Chemical’s annual cash incentive plan for each of the most recent three complete calendar years (or such lesser number of completed calendar years that the executive has been employed by us), which we refer to as the “Change in Control Payment”;

 

   

a lump sum health care stipend in the amount of $10,000; and

 

   

reimbursement for executive-level outplacement services for a period not to exceed 12 months.

In addition, with respect to Mr. Shafer, if during the term of his employment agreement, a good reason event occurs within two years following a change in control, he will receive a lump sum retention bonus in the amount of the Change in Control Payment. Mr. Shafer currently serves as President and Chief Executive Officer of Chemical Bank. Following the merger, he will serve as President and Chief Operating Officer of the combined bank. Because Mr. Shafer’s position and responsibilities will change following the merger, he will experience a good reason event under his employment agreement and will be entitled to the above-described retention bonus when the merger closes. Following his receipt of the retention bonus, he will no longer be entitled to a Change in Control Payment or other cash severance if he is later terminated without cause following the merger; however, his employment agreement will remain in effect through the then-current term and he will remain entitled to his current compensation and benefits through the end of such term.

Under each executive’s employment agreement, all severance payments and benefits (other than Mr. Shafer’s retention bonus) are conditioned on each executive’s execution of a mutually agreeable release of claims. In addition, each executive has agreed to non-competition and non-solicitation covenants during the term of each employment agreement and for a period of 24 months following the executive’s termination date, and ongoing obligations regarding the use of confidential information. Under the employment agreements, if any severance payments would be subject to excise taxes under Section 4999 of the Code, such payments will be reduced to the extent necessary so that no portion of the payments are subject to excise taxes, but only if reducing the payments provides the executive with a net after-tax benefit that is greater than if the reduction is not made.

For an estimate of the amounts that would be payable to Mr. Klaeser, Mr. Shafer and Mr. Ryan upon a qualifying termination event under their respective employment agreements, see “Merger-Related Compensation for Chemical’s Named Executive Officers” below.

Chemical Change in Control Agreements

Except as noted below, each of Chemical’s executive officers, other than its named executive officers, have a change in control agreement, which provides for, among other things, “double-trigger” severance benefits upon a qualifying termination without cause by Chemical or for good reason by the executive following a change in control. The closing of the merger will constitute a change in control for purposes of each change in control agreement. In lieu of a change in control agreement, Chemical has entered into an employment agreement with one executive officer that does not have any severance payments related specifically to a change in control.

Under the change in control agreements, if the executive experiences a qualifying termination within two years following a change in control or within six months before the date of a change in control, the executive is entitled to receive a severance payment in a lump sum equal to 1.5 times the sum of (a) his or her annual base salary (disregarding any reduction in base salary due to a good reason termination) plus (b) an amount equal to

 

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the average of his or her annual performance bonuses during the three most recently completed calendar years before the change in control event (or the lesser number of years such executive has been employed). Each executive will also receive a lump sum health care stipend in the amount of $10,000 and reimbursement for executive-level outplacement services for a period not to exceed 12 months.

The estimated aggregate amount that would be payable to Chemical’s eight executive officers with change in control agreements if the merger were to be completed on May 1, 2019 and each executive experienced a qualifying termination on that date is $6,523,789.

New Retention Agreements with David Provost and Gary Torgow

On January 27, 2019, each of Mr. Provost and Mr. Torgow entered into retention agreements with Chemical that will become effective on the closing date of the merger, pursuant to which Mr. Provost will serve as Executive Vice Chair of the board of directors of the combined company and Chair of the board of directors of the combined bank, and Mr. Torgow will serve as the Executive Chair of the board of directors of the combined company. Each retention agreement will supersede the current employment agreement between each executive and Chemical dated as of February 27, 2018. The retention agreements provide for the following:

 

   

A base salary of $950,000, a monthly car allowance of $900, and reimbursement for membership in two country clubs of his selection, which is unchanged from each executive’s current employment agreement.

 

   

Each executive will be eligible, among other things, to participate in the combined company’s annual bonus and equity programs for senior executives, with an annual bonus target equal to 100% of base salary and annual equity-based awards with a target level grant date fair value equal to 200% of base salary.

 

   

Each executive will be provided with an office on the executive floor of Chemical’s headquarters in Detroit, Michigan, exclusive use of the executive assistant assigned to executive immediately before the effective date of the merger, access to executive floor office suites for business use, use of a driver, the ability to recommend donations to charities and corporate sponsorships, company provided and maintained smartphone, laptop and home office technological equipment, access to the company aircraft for, and reimbursement of all travel and other expenses incurred related to, business activities on behalf of Chemical, the bank and their affiliates, including for attendance at bank-related or banking industry conferences, which are referred to herein as the Office of the Chairman Benefits.

 

   

In the event that either executive is terminated by Chemical without cause, or the executive resigns for good reason, the executive will be entitled to the following payments, which are generally consistent with what each would be entitled to receive under his current employment agreement:

 

   

two times the executive’s then base salary (disregarding any reduction in base salary due to a good reason termination and with base salary calculated as the higher of actual base salary or $950,000), plus two times the average of executive’s bonuses under Chemical’s annual cash incentive plan for each of the three most recently completed calendar years (with each bonus calculated as the higher of the actual bonus, including amounts deferred or paid in the form of equity, or $1.5 million per year (such highest bonus, the “Recent Bonus”)); and

 

   

a lump-sum payment equal to 24 times the executive’s monthly contribution towards coverage under the Consolidated Omnibus Budget Reconciliation Act, or COBRA, for employee and dependent health, prescription drug and dental coverage elections under Chemical’s employee benefit plans providing such benefits, minus the COBRA administrative cost.

 

   

Each executive may retire on or after 18 months following the effective date of the merger, upon 30-days advance written notice to the board. If the executive retires, he is entitled to receive (a) a

 

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continuation payment equal to the sum of (i) his base salary through the remainder of the term, and (ii) an amount equal to (A) the quotient of his Recent Bonus divided by 365 multiplied by (B) the number of days between the date of his termination and the last day of the term of the agreement, (b) full vesting of all equity-based awards granted after February 27, 2018 (with performance-based awards to vest at the greater of target or actual performance as of the termination date), (c) a lump sum payment equal to the executive’s monthly contribution towards coverage under COBRA for the remainder of the term, minus the COBRA administrative cost, and (d) a prorated annual bonus for the year in which the termination date occurs.

 

   

Consistent with each executive’s current employment agreement, all separation payments and benefits are conditioned on each executive’s execution of a mutually agreeable release of claims. In addition, each executive has agreed to non-competition and non-solicitation covenants during the term of each retention agreement and for a period of 24 months following the executive’s termination date, and ongoing obligations regarding the use of confidential information.

 

   

Upon any termination of executive’s employment during or following expiration of the term of the retention agreement, Chemical will continue to provide each executive with the Office of the Chairman Benefits, while the executive continues to serve on the board of directors.

 

   

If any severance payments payable to the executive would be subject to excise taxes under Section 4999 of the Code, such payments will be reduced to the extent necessary so that no portion of the payments are subject to excise taxes, but only if reducing the payments provides the executive with a net after-tax benefit that is greater than if the reduction is not made.

Membership of the Board of Directors of the Combined Company and Bank

The board of directors of the combined company following the merger will consist of sixteen directors, including Gary Torgow (who will serve as Chair), David Provost and six other members of the Chemical board of directors, designated by Chemical. Other than Mr. Torgow and Mr. Provost, as of the date of this joint proxy statement/prospectus, no decisions have been made with respect to which current Chemical directors will be appointed to the board of directors of the combined company in the merger.

The board of directors of the combined bank following the bank merger will consist of eleven directors, including four executive officers from Chemical—David Provost (who will serve as Chair), Thomas Shafer, Dennis Klaeser and Sandra Kuohn.

Merger-Related Compensation for Chemical’s Named Executive Officers

The section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each of Chemical’s named executive officers that is based on or that otherwise relates to the merger. The merger-related compensation payable to these individuals is subject to a non-binding advisory vote of Chemical’s shareholders, as described above in “Chemical Proposals—Chemical Proposal No. 3 - Chemical Compensation Proposal.” The table below sets forth, for the purposes of this golden parachute disclosure, the amount of payments and benefits that each Chemical named executive officer would receive, using the following assumptions:

 

   

The merger is consummated on May 1, 2019 (which is an assumed date solely for the purposes of calculations in this section);

 

   

Mr. Klaeser, Mr. Shafer and Mr. Ryan each experience a qualifying termination immediately following the merger;

 

   

For unvested time-based and performance-based restricted stock units set forth in the table, associated dividend equivalent rights have been excluded, and all performance-based restricted stock units are measured at the target performance level; and

 

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The amounts below are determined using a price per share of Chemical common stock of $44.73, the average closing price per share over the first five business days following the announcement of the merger agreement, and are based on Chemical equity awards that were outstanding as of May 1, 2019.

The calculations in the table do not include amounts that Chemical’s named executive officers were already entitled to receive or vested in as of the date of this joint proxy statement/prospectus. In addition, these amounts do not reflect compensation actions that may occur after the date of this joint proxy statement/prospectus but before the effective time of the merger. As a result of the foregoing assumptions, which may or may not actually occur or be accurate on the relevant date, including the assumptions described in the footnotes to the table, the actual amounts, if any, to be received by a named executive officer may materially differ from the amounts set forth below.

 

Name

   Cash ($) (1)     Equity ($) (2)      Perquisites/
Benefits ($) (3)
     Total ($)  

David Provost

     —   (a)      5,170,564        —          5,170,564  

Gary Torgow

     —   (a)      5,170,564        —          5,170,564  

Dennis Klaeser

     2,674,677 (b)      1,938,867        35,000        4,648,544  

Thomas Shafer

     3,347,667 (b)      2,172,268        35,000        5,554,934  

J. Brennan Ryan

     2,340,000 (b)      933,157        35,000        3,308,157  

 

(1)

Cash.

 

  (a)

With respect to Mr. Provost and Mr. Torgow, neither their current employment agreements with Chemical nor their new retention agreements that will become effective on the closing date of the merger, contain any severance provisions that are based on or otherwise relate to a change in control; however, each executive would receive a cash severance payment of $4,900,000 if the executive is terminated by Chemical without