Nicolet Bankshares Inc. (NIC) saw its stock price plummet by 5.08% in pre-market trading on Friday, following the announcement of its plans to acquire MidWestOne Financial Group (MOFG) in an all-stock transaction valued at approximately $864 million.

The deal, announced late Thursday, will see MidWestOne shareholders receive 0.3175 shares of Nicolet common stock for each share of MidWestOne they own. This values MidWestOne at about $41.37 per share, representing a 45.8% premium to its last closing price. The merger is expected to create a community bank with over $15 billion in assets, with MidWestOne shareholders comprising 30% of the new company's shares upon completion.

While the acquisition aims to strengthen Nicolet's market position, investors appear to be reacting negatively to the deal's terms and potential dilution. The all-stock nature of the transaction and the significant premium offered for MidWestOne shares may be contributing factors to the sell-off in Nicolet's stock.

Interestingly, this stock drop comes despite Nicolet Bankshares reporting strong quarterly results. For the quarter ended September 30, the company posted adjusted earnings of $2.73 per share, surpassing analyst expectations of $2.34 per share. Revenue also rose 15.9% to $79.26 million, beating the estimated $76.54 million.

The proposed merger is anticipated to be approximately 37% accretive to 2026 earnings, excluding merger-related charges, and is expected to close in the first half of 2026. However, the market's immediate reaction suggests concerns about the deal's long-term impact on Nicolet's financial structure and shareholder value.