Near the end of 2015, a First South Bancorp Inc. shareholder pushed for the sale of the Washington, N.C.-based company. The proposal was voted down at the annual stockholder meeting, but First South's board decided to authorize an independent review.
In September 2016, one bank expressed interest in acquiring First South. It was busy with another merger at the time, but indicated it could make an offer the following year. It valued First South at $12.00 per common share.
In October, another bank submitted an indication of interest, offering $11.50 per share in cash or a combination of cash and preferred stock. This was later revised upward to $12.50.
At a special board meeting in November, representatives of Raymond James said First South as a merger target might have a value between $13.00 and $15.50 per share. They added that, of the two banks that had made offers, the first one could afford to pay a price within the lower half of that range. Raymond James also identified Charleston, S.C.-based Carolina Financial Corp. as an emerging acquirer and one that could offer a higher consideration. First South's board gave the go-ahead for talks with Carolina.
Before the year ended, the same shareholder activist again called for a sale, and a third would-be acquirer reached out. The latter, however, withdrew from talks.
In the first few months of 2017, the bank that had valued First South at $12.00 per share indicated it could pay $12.00 to $15.50 per share in an all-stock deal. It soon after became involved in another merger, but also eventually upped its offer to $15.50 to $17.00 per share.
Carolina, which had been working on another acquisition, indicated it could pay $15.00 to $15.50 per share. After conducting due diligence and being informed of a rival's offer, Carolina proposed to exchange 0.5150 to 0.5175 of its common share for each First South share.
Another potential buyer reached out, but it and First South quickly realized timing and pricing expectations were not in their favor.
In April, with the board having already decided to go with Carolina, the latter submitted a nonbinding letter of intent that included trading price thresholds for possible adjustments and the allotment of two board seats.
And then the bank that had proposed an all cash or a cash-and-preferred stock deal made another offer — valuing First South between $14.50 and $17.50 per share, with consideration to be in cash, 5.75% preferred stock, or a combination of those.
Carolina in May then revised the exchange ratio to 0.5163 common share for each First South common share and asked for a longer exclusivity period. First South refused. Carolina submitted its draft merger agreement, as well as draft employment agreements for First South President and CEO Bruce Elder and senior vice president and area executive Cornelius Sullivan III. It also later increased its all-stock offer to 0.5200 of a share for each First South share.
First South's board, having considered, among other things, that a cash transaction would have limited potential upside and that a preferred stock consideration would be illiquid, accepted Carolina's updated bid on June 1.
Carolina's remaining rival persisted. On June 5, it said it could offer $17.00 per share in cash or a mix of cash and preferred stock. It also said it would publicly announce its offer on June 15.
First South and Carolina pushed through with negotiations, signed the deal on June 9 and made it public on June 12.