Terre Haute, Ind.-based First Financial Corp. agreed to acquire Hopkinsville, Ky.-based HopFed Bancorp Inc. in a cash-and-stock deal worth approximately $128.3 million.
The deal is expected to close in the second quarter.
Under the terms of the agreement, HopFed shareholders can elect to receive either 0.444 common share of First Financial or $21.00 in cash for each common share of HopFed owned, or a combination of both. This is subject to proration provisions given in the agreement that provide for a targeted aggregate split of 50% of HopFed shares being exchanged for First Financial common shares and 50% for cash. Based on the closing price of First Financial on Jan. 4, and assuming that a shareholder received 50% stock and 50% cash, the purchase price would be $20.05 per share.
At the closing of the merger, HopFed unit Heritage Bank USA Inc. will merge with and into First Financial unit First Financial Bank NA.
On a per-share basis, SNL calculates that the deal value is 152.5% of book, 152.5% of tangible book and 31.8x earnings. It is also 14.73% of assets, 18.33% of deposits and the tangible book premium-to-core deposits ratio is 8.47%.
SNL valuations for bank and thrift targets in the Midwest region between Jan. 7, 2018, and Jan. 7, 2019, averaged 163.31% of book, 175.71% of tangible book and had a median of 23.28x last-12-months earnings, on a per-share basis.
The deal has a one-day premium of 40.79% based on HopFed's closing price of $14.24 as of Jan. 4, 2019, and a one-month premium of 38.26% based on HopFed's closing price of $14.50 as of Dec. 7, 2018.
First Financial Corp. will enter Kentucky, with 11 branches to be ranked No. 30 with a 0.68% share of approximately $81.72 billion in total market deposits and will enter Tennessee, with seven branches to be ranked No. 105 with a 0.11% share of approximately $154.89 billion in total market deposits.
According to SNL data, as of Sept. 30, 2018, First Financial had assets of $2.98 billion, while HopFed had assets of $904.9 million.
First Financial was advised by the investment banking firm of Raymond James & Associates Inc. and the law firm of SmithAmundsen LLC. HopFed was advised by the investment banking firm of Sandler O'Neill & Partners LP and the law firm of Jones Walker LLP. Keefe Bruyette & Woods Inc. rendered a fairness opinion to HopFed in connection with the transaction.