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Home BancShares describes M&A pursuit, pricing, readiness to cross $10B


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Home BancShares describes M&A pursuit, pricing, readiness to cross $10B

is ready tocross the $10 billion asset threshold and remains in pursuit of an accretivedeal that will help the company grow over that level.

HomeBancShares Chairman John Allison said May 2 at the Gulf South Bank Conferencethat there are currently "lots of banks" for sale, but noted that thecompany has been outbid on a handful of transactions. He said the company madeoffers on three transactions last year and was outbid by $90 million inaggregate.

Allisonsaid those targets would have made more money for their shareholders had theydecided to take Home BancShares' offer and the ride the performance of itsstock. If those franchises had agreed to sell to Home BancShares and taken itsstock, he said they would have been valued by $180 million more in aggregate atthis point.  

"We'reprotective of our stock," Allison said. "The frustrating part for meis to watch these guys spend other peoples' money and dilute themselves intoinfinity."

Hesaid that when another acquirer comes into the company's markets and agrees topay 2.0x book to buy a bank, the transaction can spoil the market because everytarget thinks their franchise is "prettier." Allison said he wouldconsider any transaction that would move the needle from an EPS standpoint. Hefurther noted that he will move onto the next deal if the transaction does notwork because there are plenty of opportunities.

Allisonsaid during the company's first-quarter earnings call in late April that HomeBancShares had signed a letter of intent to acquire a bank in Florida, thoughhe did not provide any details on the transaction.

Allisonsaid at the Gulf South event that the company still has the capacity to pursuefurther deals in Florida and Arkansas. He said the company would eventuallyconsider acquisitions in Texas, though noted that he is currently waiting forissues in the state to play out.

Mostacquisitions would likely push Home BancShares above the $10 billion asset marksince the company ended the first quarter with $9.40 billion in assets. Allisonpreviously said the addition of a $400 million bank would offset the impact ofthe Durbin amendment reducing debit interchange fees, and that the bank wouldstay under $10 billion until 2017 to delay the expected impact if it cannotstrike a deal.

Heemphasized at the Gulf South conference that the company has prepared to crossthe $10 billion asset threshold, and has already absorbed much of the expensesthat will come with growing above that level.

HomeBancShares Senior Executive Vice President Donna Townsell added that thecompany thought 18 months ago that crossing the key regulatory thresholdsounded scary. The company considered hiring new personnel and recognized thatthere aren't many quantitative analysts living in its home market Conway, Ark.Eventually, the company spoke with other banks that had crossed the $10 billionmark and hired Crowe Horwath to help with its modeling processes. Townsell saidthe company now has 1.5 full-time employees dedicated to solely to the processwho are working with outside third parties.

Allisonsaid he was scared of crossing the $10 billion asset mark at first. He noted thatTracy French, president and CEO of Home BancShares unit Centennial Bank,received an application from a quant and joked that he couldn't even read it.Ultimately, Allison said, the company has moved through the process prettywell.

Allisonbelieves an attractive deal will eventually come the company's way, but he andother executives also noted that organic growth remains strong. Frenchhighlighted strong growth from the company's Florida and New York operations inparticular, noting that the latter has met its growth expectations.