The deal discussions between Fenton, Mich.-based Fentura Financial Inc. and Sparta, Mich.-based ChoiceOne Financial Services Inc. hit a roadblock in the fourth quarter of 2023.
Fentura decided in October 2023 to halt the talks because volatility in ChoiceOne's stock price led to concerns about the transaction's valuation, according to an SEC filing describing the background of the deal. ChoiceOne's shares fell about 22% from the start of September 2023 to the end of October 2023. However, the stock price rebounded and discussions resumed in March. In July, the companies announced a merger agreement where ChoiceOne would acquire Fentura.
Deal talk
Fentura did consider other opportunities, and on the same day it decided to halt the ChoiceOne talks, its board approved seeking a confidentiality agreement related to another strategic merger opportunity. In February, Fentura heard presentations from deal advisers about the other opportunity, the ChoiceOne deal, other possible alternatives and staying independent. The meeting also included a discussion about other potential partners and trade-offs of holding a competitive auction versus a negotiated sale.
The Fentura board decided to exclusively pursue a strategic merger with ChoiceOne, and preliminary discussions between ChoiceOne and Fentura about a strategic merger resumed.
ChoiceOne Financial submitted an indication of interest to Fentura Financial outlining and summarizing the proposed terms of a strategic business combination transaction including a proposed exchange ratio and certain governance matters on May 29.
ChoiceOne submitted a revised indication of interest to Fentura on June 3, and all directors voted to sign it. Fentura countersigned it June 5.
Fentura Financial's board approved the merger with ChoiceOne Financial on July 25 where each share of Fentura common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive 1.35 fully paid and nonassessable shares of ChoiceOne common stock, according to the regulatory filing.
Advisory fees
Hovde Group LLC was a financial adviser to Fentura Financial and State Bank in connection with the merger. Hovde will be paid approximately $2.1 million, of which $576,738 has been paid to date. Of the paid total, $426,738 was received upon the execution of the merger agreement and $150,000 upon the delivery of the fairness opinion to Fentura Financial, according to the terms of the engagement agreement.
Janney Montgomery Scott LLC was financial adviser to ChoiceOne. Under the engagement agreement, Janney Montgomery Scott will be paid a cash fee of $1,375,000, of which $25,000 became payable before the rendering of the opinion; $100,000 became payable concurrently with the rendering of the opinion. The balance is contingent upon the completion of the merger.
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