Simmons First buying Spirit of Texas Bancshares in $581M deal

Pine Bluff, Ark.-based Simmons First National Corp. has signed a deal to acquire Conroe, Texas-based Spirit of Texas Bancshares Inc. in a cash-and-stock deal valued at about $581 million.

The aggregate transaction value was based on Simmons' closing stock price of $31.73 per share on Nov. 17.

Under the terms of the deal, shares of Spirit's common stock and restricted stock units will be converted into the right to receive shares of Simmons' common stock, and Spirit's stock options and warrants will be cashed out. Simmons will issue about 18,325,000 shares of its common stock, subject to certain conditions and potential adjustments, including substituting cash for Simmons' common stock to the extent necessary to cash out Spirit's stock options and warrants.

At announcement, S&P Global Market Intelligence calculates the deal value to be 149.80% of common equity, 192.15% of tangible common equity, 21.76% of deposits, 18.42% of assets and 12.80x earnings. The tangible book premium to core deposits ratio is 12.70%.

S&P Global Market Intelligence valuations for bank and thrift targets in the Southwest region between Nov. 18, 2020, and Nov. 18, 2021, averaged 204.95% of book and 221.81% of tangible book and had a median of 15.80x last-12-months earnings, on a per-share basis.

The transaction is estimated to be accretive to Simmons' earnings per share by approximately 22 cents per share, or 9.8%, in 2023. Simmons expects to achieve cost savings of approximately 35% of Spirit's noninterest expense base, with about 50% achieved in 2022 and 100% thereafter, according to a news release.

The transaction is expected to close during the second quarter of 2022.

The agreement provides that a termination fee of $22.75 million will be payable by Spirit to Simmons upon termination of the agreement under certain specified circumstances.

Spirit operates 37 locations primarily in the Texas Triangle, which consists of the Dallas-Fort Worth, Houston, San Antonio and Austin metropolitan areas. As of Sept. 30, Spirit had total assets of $3.2 billion, total loans of $2.3 billion and total deposits of $2.7 billion, according to the news release.

Based on S&P Global Market Intelligence data, upon completion of the deal, Simmons will expand in Texas by 37 branches to be ranked No. 29 with a 0.31% share of approximately $1.57 trillion in total market deposits.

Keefe Bruyette & Woods served as financial adviser and Covington & Burling LLP acted as legal adviser to Simmons. Stephens Inc. served as financial adviser and Hunton Andrews Kurth LLP acted as legal adviser to Spirit.

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