Arkansas-based Home BancShares Inc., the parent company of Centennial Bank, agreed to acquire Texas-based Happy Bancshares Inc., the parent company of Happy State Bank, in an all-stock deal valued at approximately $919 million.
The merger is expected to close in the first quarter of 2022.
The combination positions Home BancShares to expand further into Texas and to potentially acquire additional institutions over time, according to a news release.
Under the terms of the agreement, Happy Bancshares shareholders will receive 2.17 shares of Home BancShares stock for each share of Happy Bancshares they own and will begin receiving quarterly dividends declared by Home BancShares. Based on a volume-weighted average closing price per share of Home BancShares stock of $21.77 during the 20-trading-day period ending Sept. 13, 2021, the per-share consideration value is $47.24 and the aggregate transaction value is about $919 million.
At announcement, S&P Global Market Intelligence calculates the deal value to be 126.87% of common equity, 159.18% of tangible common equity, 14.16% of assets, 16.81% of deposits and 12.21x earnings. The tangible book premium to core deposits ratio is 7.23%.
Market Intelligence valuations for bank and thrift targets in the southwest region between Sept. 15, 2020, and Sept. 15, 2021, averaged 180.96% of book and 190.63% of tangible book and had a median of 17.23x last-12-months earnings on an aggregate basis.
Home BancShares said the deal will be immediately triple accretive, resulting in increases to EPS of 5.5% and 9.2% for 2022 and 2023, respectively; an increase to book value per share of 5.1%; and an increase to tangible book value per share of 1.5%.
The pro forma bank will have about $23.3 billion in assets, $13.4 billion in loans and $18.7 billion in deposits and will be one of the 75 largest U.S. banks, according to the news release. Home BancShares will continue to be headquartered in Conway, Ark. and to operate as Centennial Bank in its current markets. Branches located in Texas will be branded Happy State Bank, a Division of Centennial Bank.
Based on Market Intelligence data, with the completion of the deal, Home BancShares will enter Texas with 63 branches to be ranked No. 28 with a 0.34% share of approximately $1.57 trillion in total market deposits.
As part of the deal, Home BancShares will add Happy Bancshares Chairman J. Pat Hickman to its board. Happy Bancshares CEO Mikel Williamson will join the Centennial Bank executive team, and additional Happy State Bank executives will maintain leadership roles in Texas markets.
The agreement provides certain termination rights for both Home BancShares and Happy Bancshares, including a right for either company to terminate the deal in the event the merger has not been completed by Sept. 15, 2022. Additionally, a termination fee of $35 million will be payable by Happy Bancshares upon termination of the agreement under certain, limited circumstances.
Piper Sandler served as the financial adviser to Home BancShares and provided a fairness opinion, with Mitchell Williams Selig Gates & Woodyard serving as legal adviser. Stephens Inc. served as financial adviser to Happy Bancshares and provided a fairness opinion, with Alston & Bird serving as legal adviser.
