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Cadence, State Bank Financial to merge in $1.4B all-stock deal

The deal terms described in this article relate to the original deal announcement, which was subsequently updated. Read about the updated deal terms here.

Houston-based Cadence Bancorporation and Atlanta-based State Bank Financial Corp. have agreed to merge in a stock-for-stock deal valued at about $1.4 billion.

Under the terms, State Bank shareholders will get 1.160 Cadence class A common share for each State Bank common share. After closing, legacy Cadence's and State Bank shareholders will own approximately 65% and 35% of the combined company, respectively.

On a per-share basis, SNL calculates that the deal value is 127.7% of book, 148.8% of tangible book and 14.4x earnings. It is 17.24% of assets, 20.27% of deposits and the tangible book premium-to-deposits ratio is 6.66%.

For reference, SNL valuations for bank and thrift targets in the Southeast region between May 13, 2017, and May 13, 2018, averaged 165.98% of book, 177.60% of tangible book and had a median of 24.82x last-12-months earnings, on a per-share basis.

The deal has a one-day premium of 6.01%, based on State Bank's May 11 closing price of $33.08, and a one-month premium of 14.52%, based on State Bank's April 13 closing price of $30.62.

As of March 31, Cadence had $11.0 billion in assets, while State Bank had $4.89 billion in assets. The combined organization will have $16 billion in assets, $12 billion in loans, $13 billion in deposits and about 100 branches serving Texas, Georgia, Florida, Alabama, Tennessee and Mississippi.

Cadence will enter Georgia with 33 branches to be ranked No. 11 with a 1.46% share of approximately $240.82 billion in total market deposits.

Upon completion of the deal, three State Bank directors will become part of the board of Cadence and Cadence Bank NA. State Bank Board Chairman Joe Evans will serve as vice chairman of Cadence. Tom Wiley, vice chairman of the State Bank board, will serve as a director of Cadence and chairman of Cadence Bank.

Additionally, Cadence Bank CEO Sam Tortorici will relocate to Atlanta as the bank's corporate headquarters will be moved to the city from Birmingham. Cadence's holding company headquarters will remain in Houston.

Cadence expects the deal to be about 7% accretive to EPS in 2020, excluding one-time charges. The deal is expected to produce approximately 4% tangible book value per share dilution at closing with an earnback period of less than three years.

The boards of the Cadence and State Bank Financial unanimously approved the deal. Cadence's controlling shareholder, Cadence Bancorp LLC, gave its consent for the adoption of the merger agreement.

The deal is expected to close in the fourth quarter of 2018, pending approvals by regulators and State Bank shareholders.

Goldman Sachs & Co. LLC served as financial adviser and Wachtell Lipton Rosen & Katz acted as legal adviser to Cadence. Sandler O'Neill & Partners LP and Raymond James & Associates Inc. served as financial advisers, and Nelson Mullins Riley & Scarborough LLP served as legal adviser to State Bank. FIG Partners provided a fairness opinion and Kilpatrick Townsend & Stockton LLP served as legal adviser to State Bank's independent directors committee. Matthew F.X. Veneri was the investment banker on the deal.

To use S&P Global Market Intelligence's branch analytics tools to compare market overlap, click here. To create custom maps, click here.

SNL is owned by S&P Global Market Intelligence.

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