Tri-Valley Bank is merging into Heritage Commerce Corp unit Heritage Bank of Commerce in a deal valued at around $31.6 million.
Heritage Commerce will issue about 1.9 million common shares as part of the deal. Tri-Valley had $147.2 million in total assets as of Sept. 30, and Heritage Commerce had $2.84 billion, according to SNL data. With this deal, the combined company is slated to have total assets of approximately $3.0 billion.
Tri-Valley shareholders will receive a fixed exchange ratio of 0.0489 Heritage common share for each Tri-Valley common share. Based on the 20-day volume-weighted average Heritage stock price of $15.76 as of close of market Dec. 19, total consideration for each Tri-Valley share would be 77 cents.
The deal should close in the second quarter of 2018, subject to applicable regulatory and shareholder approvals. It is expected to be accretive to tangible book value and earnings, after transaction costs have been absorbed. The parties intend the transaction to qualify as a tax-free reorganization for U.S. federal income tax purposes, and Tri-Valley shareholders are not expected to recognize gain or loss to the extent of the stock consideration received.
On a per-share basis, SNL calculates the deal to be 145.3% of book and tangible book and 4.2x earnings. It is also 21.14% of assets, 24.57% of deposits and the tangible book premium-to-core deposits ratio is 11.99%.
The deal has a one-day premium of 19.66%, based on Tri-Valley Bank’s Dec. 19 closing price of 63.38 cents, and a one-month premium of 16.68%, based on Tri-Valley Bank’s Nov. 20 closing price of 65 cents.
SNL valuations for bank and thrift targets in the West region between Dec. 20, 2016, and Dec. 20, 2017, averaged 177.54% of book, 187.49% of tangible book and had a median of 24.15x last-12-months earnings, on a per-share basis.
Heritage Commerce will expand in Alameda County, Calif., by one branch to be ranked No. 17 with a 0.67% share of approximately $46.87 billion in total market deposits and will expand in Contra Costa County, Calif., by one branch to be ranked No. 14 with a 1.03% share of approximately $46.79 billion in total market deposits.
Existing shareholders of Heritage are expected to own approximately 95.2% of the outstanding shares of the combined company and Tri-Valley shareholders are to own roughly 4.8%.
MJC Partners LLC was financial adviser to Heritage in the deal and delivered a fairness opinion to the Heritage board. Buchalter was legal counsel to Heritage. FIG Partners acted as financial adviser to Tri-Valley and delivered a fairness opinion to Tri-Valley's board. Sheppard Mullin Richter & Hampton LLP was legal counsel to Tri-Valley.
SNL is an offering of S&P Global Market Intelligence.