Seacoast revisited price of Drummond transaction before inking merger agreement

Stuart, Fla.-based Seacoast Banking Corp. of Florida elected to revisit the price of its transaction with Chiefland, Fla.-based Drummond Banking Co. roughly a month before the parties signed their merger agreement.

Drummond's hunt for a potential buyer started in January when the company's financial adviser, Hovde Group LLC, reached out to several parties. Six of them entered into nondisclosure agreements to have access to confidential information about Drummond through a data room.

Seacoast and two other parties submitted letters of intent to Drummond around mid-March, but the representatives of Drummond decided to pursue talks with Seacoast, considering the price offered, quality of franchise and management, and Seacoast's position as a Florida financial institution.

On March 12, the companies signed a letter of intent that provided for a transaction consisting of roughly 90% Seacoast stock and 10% cash, with a fixed exchange ratio of 48.6460 shares of Seacoast stock and $194.75 in cash consideration for each outstanding Drummond common share, representing an aggregate deal value of $194.4 million on that day.

During Seacoast's due diligence review of Drummond and meetings with Drummond's management team in March and April, the parties exchanged drafts of a definitive merger agreement and continued negotiations of the deal's terms.

In April, Seacoast elected to revisit the transaction price as the value of Drummond unit Drummond Community Bank's securities portfolio as of March 31 decreased by about $21 million quarter over quarter due to the rising interest rate environment. On April 30, the parties agreed to a 100% Seacoast stock transaction and set the exchange ratio at 51.9561 shares of Seacoast common stock for each outstanding Drummond common share. On that day, the revised exchange ratio represented an aggregate deal value of $173.5 million.

During April and early May, Seacoast and Drummond representatives continued exchanging, reviewing, discussing and negotiating the terms of the definitive transaction agreements.

Seacoast and Drummond inked their merger agreement and the related agreements May 4. Under the terms of the deal, Seacoast will acquire Drummond for roughly $173.2 million, based on Seacoast's closing price of $33.72 as of May 3.