The transaction between Hoquiam, Wash.-based Timberland Bancorp Inc. and in-state peer South Sound Bank was announced May 23, but the deal almost never happened.
In September 2017, the Timberland board approved a letter of intent to acquire South Sound Bank for $33.0 million. But the South Sound Bank board rejected it as inadequate.
The Timberland board in October 2017 approved a revised letter of intent to acquire South Sound Bank for $34.5 million, which the South Sound Bank board approved subject to structural enhancements to the letter of intent.
The deal process continued, but South Sound Bank halted legal negotiations with Timberland in early 2018; the South Sound Bank board decided to pursue a proposal from another bank. An investment banker representing that suitor indicated that it would like to buy South Sound Bank for $40 million and would move quickly to perform due diligence and legal negotiations to announce the transaction in April.
But that bank backed out of the process in late March for unspecified reasons.
On April 4, the respective CEOs of South Sound Bank and Timberland met and renewed negotiations. The CEOs discussed price and terms on April 19-20 and agreed to keep the previously negotiated $34.5 million purchase price, with the exchange ratio on the stock portion of the purchase price revised due to the increase in Timberland stock price. A decision was also made to delete any price collar and to add a breakup fee to be paid by Timberland to South Sound Bank under certain circumstances.
The merger agreement was executed May 22. It includes a termination fee of about $1.0 million to be paid by South Sound Bank to Timberland should the deal fall through under certain circumstances. Timberland must pay South Sound Bank a $400,000 termination fee if the agreement is terminated by South Sound Bank as a result of a willful and material breach of the agreement's provisions by Timberland or Timberland Bank.