Dubuque, Iowa-based Heartland Financial USA Inc. agreed to buy Overland Park, Kan.-based Blue Valley Ban Corp. in an all-stock transaction worth approximately $93.9 million.
The transaction is valued at approximately $14.87 per Blue Valley common share, based on Heartland's closing common share price of $45.45 on Jan. 15. Blue Valley shareholders will receive 0.3271 of a Heartland common share for each common share of Blue Valley owned before the deal closes. Holders of Blue Valley's series B preferred stock will also have the right to receive Heartland common shares at the same rate. The preferred stock will be converted into an equal number of common shares before the deal closes.
At closing, Blue Valley unit Bank of Blue Valley will merge with and into Heartland's Merriam, Kan.-based unit, Morrill and Janes Bank and Trust Co. The combined bank will operate under the Bank of Blue Valley brand.
The deal has a one-day premium of 32.15%, based on Blue Valley's Jan. 15 closing price of $11.25. It has a one-month premium of 25.14%, based on Blue Valley's Dec. 17, 2018, closing price of $11.88.
On an aggregate basis, SNL calculates that the deal value is 187.5% of book and tangible book and 39.2x earnings. It is also 12.91% of assets, 15.47% of deposits and the tangible book premium-to-core deposits ratio is 8.15%.
For comparison, SNL valuations for bank and thrift targets in the Midwest region between Jan. 16, 2018, and Jan. 16, 2019, averaged 160.14% of book, 170.62% of tangible book and had a median of 21.94x last-12-months earnings, on an aggregate basis.
The transaction is expected to be completed in the second quarter. The combined bank will have approximately $12 billion in assets and 127 branches operating across 12 states.
Heartland will expand in Johnson County, Kan., by five branches to be ranked ninth with a 3.85% share of approximately $19.97 billion in total market deposits. The company also expects the transaction to qualify as a tax-free exchange with respect to the stock consideration received by Blue Valley's shareholders.
The chairman, president and CEO of Bank of Blue Valley, Robert Regnier, will be executive chairman and CEO of the combined bank when the deal closes. The president and CEO of Morrill & Janes Bank, Wendy Reynolds, will be president of the combined bank.
Panoramic Capital Advisors Inc. served as financial adviser to Heartland in the deal, and Dorsey & Whitney LLP served as Heartland's legal counsel. D.A. Davidson & Co. served as financial adviser to Blue Valley, and Hunton Andrews Kurth LLP served as Blue Valley's legal counsel.