Cadence Bank's announced sale to Huntington Bancshares Inc. was the best way for the bank to fast-forward its growth in a period of "hyper-consolidation," Cadence Chairman and CEO Dan Rollins said in an interview.
The current regulatory environment is going to allow banks to consolidate at an expedited pace for the next several years, and Cadence had the choice to continue down its established path of rolling up multiple bank deals each year or diverge from that path, Rollins said.
The bank could have done upwards of 10 acquisitions over the next few years and grown to as large as $150 billion in assets, Rollins said. But, he added, "Five years from now, what does a $150 billion bank mean?"
Selling to Huntington allows the company to better its products, services and technology, while maintaining its legacy in rural markets, Rollins said.
"We weren't looking for a partner," he said. "But when I sit here today, this outcome is by far the best possible outcome we could have ever had in a transaction like this."
Deal talks
The two companies' executive teams have been in deal talks for months, even before Huntington announced its purchase of Veritex Holdings Inc.
Rollins began talking with Huntington's chairman, president and CEO, Stephen Steinour, and president of consumer and regional banking, Brant Standridge, at an investor conference in June, which resulted in Rollins visiting the Huntington headquarters in Columbus, Ohio, on July 1, Standridge said in an interview.
At that point, Rollins said, "There had been zero discussion about a partnership or an acquisition or a merger."
Rollins was trying to learn from the larger institution and glean ideas for running his business, which was smaller but had a similar approach to customer service and technology, he said. He visited Huntington's branches in West Virginia to evaluate how the bank operates in environments similar to Cadence's rural footprint.
Cadence's executive team discussed the idea of a possible partnership at a board meeting in late July. The bank had just closed its acquisition of Industry Bancshares Inc. on July 1 and had other options for smaller acquisitions, but discussed an alternate path of partnering with a larger institution, Rollins said.
Integrating
Both Huntington and Cadence have contributed to the consolidation of the US bank industry; Rollins said the deal is the 50th in his career.
Huntington and Cadence have recently completed or are in the process of completing integrations of recently acquired banks. They now stare down the challenge of combining themselves.
The key to integrating successfully is transparency, Standridge said. Veritex Chairman, President and CEO Malcolm Holland "was one of the first folks that I personally called to share with him that we were actually having a conversation with Dan," Standridge said.
Rollins visited with leaders of Industry Bancshares leading up to the deal announcement to make sure everyone was on the same page, he said. Executives at Cadence and Huntington have been in close communication for the past 90 days, Standridge said.
While analysts generally agree that the combination makes sense, the deal's integration has caused concern for some.
The deal "adds another major item to what was already a very busy story: Aggressive organic growth, the just-closed VBTX integration, and now another (even bigger) integration to tackle over a much broader area," Piper Sandler analyst Scott Siefers wrote. "So lots of balls in the air that could cloud the story and keep the shares from advancing for now."
Standridge said the two companies' due diligence period was much longer than is typical in the industry.
"What that's allowed us to do, frankly, is to get really far along from a planning perspective," he said. "Generally, in a partnership like this, you can have some disruption on the front end. And I'm sure we won't be completely immune from that. But we'll have taken a lot of steps to minimize that."
