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Civista defeated rival whose revised bid for United Community had lower value

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Civista defeated rival whose revised bid for United Community had lower value

Civista Bancshares Inc., which in March announced its proposed acquisition of United Community Bancorp, submitted its nonbinding preliminary indication of interest letter for the Lawrenceburg, Ind.-based company in December 2017.

Civista's letter reflected a range of value with consideration consisting of Civista common stock and up to 20% cash consideration. The Sandusky, Ohio-based company proposed that it would pay a price between $24.50 and $26.00 for each United Community share.

Two other financial institutions submitted bids. One involved an 80%-stock and 20%-cash deal, and the other was a 75%-stock and 25%-cash deal. All three offers had a fixed exchange ratio for the stock consideration.

Eventually, the suitor whose offer had involved a 75%-stock and 25%-cash deal wished to postpone discussions with United Community for some time. It was determined that it was not in United Community's or its shareholders' best interests to delay the process to accommodate the request.

A special joint meeting of the Civista board and the Civista Bank board was called on Feb. 1 to consider the terms of an updated indication of interest regarding United Community. The Civista board authorized the submission of a bid based on the proposed terms with limited authority for management to increase the amount of the bid and with up to 10% of the consideration to be paid in cash and the balance paid in the form of Civista common shares.

On Feb. 6, United Community received revised nonbinding indication of interest letters from the two remaining suitors. Civista's offer reflected consideration of 1.027 Civista common shares and $2.54 in cash for each United Community common share, which equated to a value of $25.45 per United Community common share, based on Civista's 15-day trailing trading average.

The other suitor's offer consisted of 80% stock and 20% cash, with a fixed exchange ratio for the stock consideration. It represented a decrease from its initial proposal and had a lower value than Civista's offer.

The United Community board held a meeting Feb. 8 and reviewed the two offers; it chose to pursue a transaction with Civista. Civista was asked to revise its indication of interest to reduce the amount of the breakup fee that United Community would be required to pay in the proposed deal and to increase the percentage of cash it was proposing as part of the merger consideration and to increase the exchange ratio. But the United Community board agreed that the company should move forward with negotiating a definitive merger agreement with Civista even if it did not change its offer.

On Feb. 9, Civista submitted an updated indication of interest reducing the amount of the breakup fee to $3.5 million, but did not increase the percentage of cash or the exchange ratio.

The deal process continued, and the merger agreement was executed March 11.