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Pinnacle Financial to buy BNC for $1.9B

Pinnacle Financial Partners Inc. is acquiring BNC Bancorp for approximately $35.70 per share, or a total of $1.9 billion, based on the acquirer's 20-day trailing average closing price as of Jan. 20.

BNC shareholders will receive 0.5235 Pinnacle shares for each BNC common share held, with all outstanding stock options fully vested upon the merger's close and all outstanding, unexercised options to be cashed out. All fractional shares will also be cashed out. BNC shareholders will also get an approximately 47% dividend increase upon completion.

Before the merger closes, Pinnacle expects to complete a Tier I equity raise, in order to compensate for its and BNC's trust preferred securities no longer qualifying as Tier I post-completion. They may, however, qualify as Tier II.

Pending regulatory and shareholder approvals, the deal is expected to close in the third quarter. If a fourth-quarter technology conversion pushes through and other conditions are met, the deal is projected to be accretive to Pinnacle's 2018 EPS by about 10%, excluding merger- and integration-related costs. It is also expected to be accretive to tangible book value, inclusive of said costs.

The deal value, according to SNL data, is 200.5% of book, 271.4% of tangible book and 23.7x last-12-months earnings, on a per-share basis. It is also 30.64% of deposits and 25.45% of assets. For comparison, SNL calculates that offers for bank and thrift targets in the Southeast between Jan. 22, 2016, and Jan. 22, 2017, averaged 132.94% of book, 138.55% of tangible book and had a median of 21.01x last-12-month earnings, on an aggregate basis. On a per-share basis, offers averaged 153.04% of book, 163.89% of tangible book and had a median of 21.90x last-12-month earnings.

The deal value has a one-month premium on the deal of 2.59%, based on BNC's closing price of $32.30 on Dec. 21, 2016. It has a one-day discount, however, of 0.19%, to BNC's closing price on Jan. 20 of $33.20.

BNC is the parent of High Point, N.C.-based Bank of North Carolina. In 2016, it completed the acquisitions of High Point Bank Corp. and Southcoast Financial Corp. Bank of North Carolina, according to the Jan. 22 press release, has $7.4 billion in assets.

Pinnacle Financial is the parent company of Nashville, Tenn.-based Pinnacle Bank and Pinnacle Wealth Advisors. In 2016, it completed its purchase of Avenue Financial Holdings Inc. and increased its stake in Bankers Healthcare Group LLC to 49%. On Jan. 17, it reported EPS of 78 cents for the fourth quarter of 2016, up from the year-ago period's 65 cents. Pinnacle Bank, as of Sept. 30, 2016, had $10.91 billion in assets.

Post-merger, Pinnacle will have $20 billion in assets, $14 billion in loans and $15 billion in deposits, on a pro forma basis. It will operate in four states, with BNC's current president and CEO, Richard Callicutt II, serving as chairman of Virginia and the Carolinas. BNC CFO David Spencer will serve as executive vice president.

Callicutt and three other BNC directors will also join Pinnacle's board.

Keefe Bruyette & Woods and Bass Berry & Sims PLC served as Pinnacle's financial adviser and legal counsel, respectively. For BNC, Banks Street Partners LLC and Sandler O'Neill & Partners LP were financial advisers, while Wachtell Lipton Rosen & Katz and Troutman Sanders LLP were legal counsel.

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