It took about five months for the California-based TriCo Bancshares and Valley Republic Bancorp to sign their merger agreement, valued at approximately $165.3 million at the time of announcement.
On March 5, investment banking firm Stephens Inc. facilitated an informal meeting between Valley President and CEO Geraud Smith and TriCo's Chairman and CEO Richard Smith and COO John Fleshood. Just a few weeks later, on March 24, representatives from Tri Counties Bank's parent expressed a preliminary interest in discussing a business combination with the Bakersfield, Calif.-based Valley Republic.
Valley's board has had discussions in the past regarding possible combination with other financial institutions, nevertheless its board's general position was to remain independent, the bank revealed in an Oct. 20 filing. TriCo's verbal inquiry was reported to Valley's board without any follow-up action being authorized or taken.
After receiving a letter from TriCo's financial adviser Keefe Bruyette & Woods Inc. for a proposed timeline, Valley's board executive committee met on April 8 and recommended to the board to pursue the transaction with TriCo. Soon after, the parties executed a mutual confidentiality and nondisclosure agreement. Preliminary due diligence started April 23.
On May 7, TriCo management presented a draft of a proposed nonbinding letter of intent to Valley with a fixed-exchange ratio of 0.875 share of TriCo stock for each share of Valley in an all-stock transaction, valuing Valley at $41.13 per share with an aggregate valuation of $178.7 million, based upon the closing price of TriCo stock on May 6. However, after analyzing the proposal, Valley's financial adviser Stephens informed TriCo the offer was insufficient.
Discussions between the parties continued and on May 20 the fixed-exchange ratio was increased to 0.95 of a TriCo share for each Valley share. The offer was approved by both parties valuing Valley at $44.92 per share or $195.4 million, based upon the closing price of TriCo stock as of May 21.
Between May 24 and July 21, the parties held several meetings to review the drafts of the merger agreements and a formal due diligence process was executed. After the boards of both companies unanimously approved the merger agreement, the parties executed the merger agreement and announced the transaction in a joint press release on July 27.
At the time of the announcement, the transaction had a value of approximately $165.3 million, or $38.07 per common share of Valley, based on the closing price of TriCo shares on July 27.
Pursuant to the terms of the announced transaction, Valley may be required to pay TriCo a termination fee of about $6.6 million, if the merger agreement is terminated under certain circumstances.
