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Equity Bancshares again acquiring 2 banks at once in deals worth $61M

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Equity Bancshares again acquiring 2 banks at once in deals worth $61M

Equity Bancshares Inc. continues its acquisitive run, this time acquiring Liberal, Kan.-based Kansas Bank Corp. and Blue Springs, Mo.-based Adams Dairy Bancshares Inc. in two deals valued at $60.9 million.

The announcement came just a month after the Wichita, Kan.-based company completed two acquisitions in Oklahoma.

At the effective time of the merger, Kansas Bank shareholders will have the right to receive an aggregate consideration of about $558.69 per share. For each share held, Kansas Bank stockholders have the right to receive 10.173 shares of Equity's common stock and $207.83 in cash. Assuming an Equity stock price of $34.49 per share, the aggregate transaction value to acquire the First National Bank of Liberal parent is around $45.1 million.

SNL calculates that the transaction with Kansas Bank has a deal value of 143.2% of book and tangible book and it is 15.5x earnings, on an aggregate basis. It is 14.70% of assets and 16.62% of deposits and carries a tangible book premium that is 6.59% of core deposits. For comparison, SNL valuations for bank and thrift targets in the Midwest between Dec. 18, 2016, and Dec. 18, 2017, averaged 156.94% of book, 161.84% of tangible book and had a median of 21.56x last-12-months earnings, also on an aggregate basis.

The merger is expected to be accretive by 6 cents to 2018 earnings per share and by 10 cents to 2019 EPS. One-time merger-related costs will be around $6.1 million. The merger will be 1.8% dilutive to tangible book, per share, at closing, inclusive of the estimated purchase accounting adjustments, with a 2.8-year earnback using the crossover method. By acquiring Kansas Bank, Equity will enter Seward County, Kan., with four branches, to be ranked first with a 56.93% share of approximately $441.52 million in total market deposits, and enter Stevens County, Kan., with one branch, to be ranked second with a 26.84% share of approximately $134.23 million in total market deposits.

Meanwhile, Adams Dairy shareholders will have the right to receive an aggregate consideration of around $22.03 per share. For each share held, Adams Dairy stockholders will have the right to receive 0.4791 of a share of Equity common stock and $5.51 in cash. Also assuming an Equity stock price of $34.49 per share, the aggregate transaction value to acquire the Adams Dairy Bank parent is around $15.8 million.

SNL calculates that deal's value to be 156.1% of book and tangible book and 16.3x earnings, on an aggregate basis. It is also 12.47% of assets, 15.46% of deposits and carries a tangible book premium that is 7.71% of core deposits. For comparison, SNL valuations for bank and thrift targets in the Midwest between Dec. 18, 2016, and Dec. 18, 2017, averaged 156.94% of book, 161.84% of tangible book and had a median of 21.56x last-12-months earnings, on an aggregate basis.

Equity expects the Adams Dairy deal to be accretive to EPS by 3 cents in 2018 and by 5 cents in 2019. One time merger-related costs will be around $2.8 million. The merger will be 0.5% dilutive to tangible book per share at closing, inclusive of the estimated purchase accounting adjustments, with earnback in 2.7 years using the crossover method. Equity will expand in Jackson County, Mo., by one branch, where it will rank No. 14 with a 0.78% share of approximately $23.85 billion in total market deposits.

The two deals are subject to customary regulatory approvals as well as shareholder approvals of Kansas Bank and Adams Dairy. They are slated for completion in the spring of 2018.

As of Nov. 10, after it completed its mergers with Eastman National Bancshares Inc. and Cache Holdings Inc., Equity had consolidated assets of $3.0 billion, loans of $2.0 billion and deposits of $2.3 billion. It also had 42 full-service bank locations in Arkansas, Kansas, Missouri and Oklahoma. As of Sept. 30, Kansas Bank had $310 million in total assets, $170 million in loans and $274 million in deposits while Adams had $127 million in total assets, $91 million in loans and $102 million in deposits.

The combined institution is expected to have $3.5 billion in consolidated total assets, $2.3 billion in loans and $2.8 billion in deposits.

Equity Bancshares hired Keefe Bruyette & Woods, led by James Harasimowicz and Frank Sorrentino, as financial adviser for the Kansas Bank deal, and Stephens Inc., led by Jeffrey Jones and Edward Michael Rosinus, for the Adams Dairy deal. Each financial adviser also delivered a fairness opinion on the deal. Norton Rose Fulbright US LLP was legal counsel for both deals.

Kansas Bank had Sheshunoff and Co. as financial adviser and Foulston Siefkin LLP as legal counsel. The Capital Corp. was financial adviser to Adams Dairy, and Stinson Leonard Street was its legal counsel.

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