Heartland BancCorp to merge into German American Bancorp in all-stock deal

Whitehall, Ohio-based Heartland BancCorp, the parent company of Heartland Bank, agreed to merge into Jasper, Ind.-based German American Bancorp Inc., the parent company of German American Bank.

The all-stock transaction, which was unanimously approved by both companies' board, is expected to close in the first quarter of 2025. The deal is subject to the approval of regulators, shareholders of German American Bancorp and Heartland, and other customary closing conditions.

After the deal closes, Heartland Bank will be merged into German American Bank and operate under a co-branded name within the Ohio markets.

Other than the retirement plan, Heartland shareholders will receive 3.90 German American Bancorp common shares for each Heartland common share in an all-stock, tax-free exchange. The shares held by the Heartland retirement plan will be exchanged for an equivalent cash payment.

Based on the number of Heartland common shares expected to be outstanding at closing, German American Bancorp would issue about 7.66 million shares of its common stock. With a $39.84 per-share volume-weighted average price for German American Bancorp common stock over the 10-day trading period ended July 26, the indicated per-share value to Heartland shareholders is $155.37 and the aggregate transaction value, inclusive of cash payments for in-the-money options and in exchange for Heartland shares held through the Heartland retirement plan, would be roughly $330.2 million.

Heartland operated 20 full-service banking offices as of June 30, and had assets of about $1.9 billion, loans of $1.5 billion and deposits of $1.6 billion. Giving effect to the merger July 29, the combined organization will have more than $8.1 billion in assets and a branch network of almost 95 rural, suburban and urban locations across Southern Indiana, Central and Northern Kentucky and Central and Southwest Ohio, according to a news release.

Following deal completion, German American Bancorp will enter Ohio with 20 branches to be ranked No. 29, with a 0.26% share of approximately $547.69 billion in total market deposits. It will also expand in Kentucky by three branches to be ranked No. 16, with a 1.42% share of approximately $114.15 billion in total market deposits.

At the announcement, S&P Global Market Intelligence calculates the deal value to be 200.37% of common equity, 217.51% of tangible common equity, 21.31% of deposits, 18.49% of assets and 16.38x earnings. The tangible book premium to core deposits ratio is 15.64%.

Market Intelligence valuations for bank and thrift targets in the Midwest region between Jul. 29, 2023, and Jul. 29, 2024, averaged 117.77% of book and 123.22% of tangible book and had a median of 18.84x last-12-months earnings, on an aggregate basis, and averaged 127.43% of book and 136.41% of tangible book and had a median of 20.05x LTM earnings, on a per-share basis.

D. Neil Dauby, chairman and CEO of German American Bancorp, said the transaction is anticipated to gradually increase the company's earnings per share during the 12 months following completion with a "relatively quick" tangible book value earn back period.

G. Scott McComb, chairman, president and CEO of Heartland, is expected to join the German American Bancorp and German American Bank boards, while members of the Heartland executive and senior teams are anticipated to stay on as regional management.

In addition to Scott McComb, current Heartland board member Ronnie Stokes is expected to join the boards of German American Bancorp and German American Bank.

Keefe Bruyette & Woods Inc. was financial adviser to German American Bancorp, and Dentons Bingham Greenebaum LLP was its legal counsel. Raymond James & Associates Inc. was the financial adviser to Heartland, and Hunton Andrews Kurth LLP was its legal counsel.

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