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Final buyer's existing stake in Liverpool Community Bank deciding factor in deal


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According to Market Intelligence, April 2023

Final buyer's existing stake in Liverpool Community Bank deciding factor in deal

Mifflintown, Pa.-based Juniata Valley Financial Corp.'s existing stake and board representation in Liverpool Community Bank proved to be a significant factor in the former's acquisition of the Liverpool, Pa.-based bank.

Juniata Valley Financial acquired a 39.16% stake in Liverpool Community Bank in 2006, and since then has had two representatives on the latter's board. Juniata would informally inquire about the Liverpool board's openness to a deal, but no serious talks were held.

It wasn't until late 2014 that Liverpool Community Bank's various concerns tipped its decision toward being acquired, and the board asked Juniata Valley Financial to submit a proposal to acquire Liverpool's remaining stake. Informal meetings between the two parties were held between November 2014 and May 2015, and Juniata submitted two informal proposals that Liverpool rejected.

Juniata Valley Financial submitted an initial nonbinding indication of interest in September 2016, proposing to merge Liverpool Community Bank into Juniata Valley Bank. The proposal for a fixed exchange ratio contained a mix of stock and 20% cash equal to $3,344.00 per share, representing total consideration of about $10.4 million. The proposal, which did not include board representation for Liverpool's directors, was rejected in November 2016.

In April 2017, Liverpool Community Bank received a nonbinding indication of interest from another party. The proposal was for a fixed exchange ratio comprising 50% stock and 50% cash, equal to $4,261.00 per share along with a single-member representation on the acquirer's board. The total consideration was valued at approximately $13.2 million.

At a June 2017 board meeting to discuss pending offers for Liverpool Community Bank, Juniata Valley Financial, acting as a Liverpool shareholder, did not approve the proposed transaction. In July 2017, Juniata submitted a nonbinding indication of interest that increased the stock portion of the merger consideration to a range of 80%?to?85% of its stock and a fixed exchange ratio, with the remaining merger consideration to be paid in cash of $4,050.00 per share. Total consideration was approximately $12.6 million.

Meanwhile, the other party in September 2017 said it remained willing to engage in talks with the Liverpool Community Bank board despite not receiving a formal response to its proposal. In October 2017, Liverpool reached out to Juniata Valley, saying that it would like to negotiate a deal.

In November 2017, Juniata Valley Financial submitted an updated nonbinding indication of interest for Liverpool Community Bank, with the material terms of the revised proposal, including the financial terms, being substantially identical to the material terms contained in the July 2017 proposal.

Due to Juniata Valley Financial's existing stake and board representation in Liverpool Community Bank, it was decided in a meeting Dec. 1, 2017, to consider Juniata's offer, despite being lower, as its existing ownership could impact deal execution with the other institution. The committee unanimously concluded that, while slightly lower in aggregate consideration value, Juniata’s proposal was superior to the other party's, primarily due to the lack of execution risk.

Liverpool Community Bank and Juniata Valley Financial entered into a mutual confidentiality agreement Dec. 13, 2017. The proposal also included Juniata's acknowledgement of Liverpool's intention to pay a $100,000 special cash dividend to its shareholders before the acquisition. The deal was executed Dec. 29, 2017.