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Renasant Corp. buying Brand Group Holdings in $452.9M deal

Tupelo, Miss.-based Renasant Corp. is acquiring Lawrenceville, Ga.-based Brand Group Holdings Inc.

The transaction, 95% stock and 5% cash, is valued at approximately $452.9 million in the aggregate, or $1,447 per share, based on Renasant's closing price of $41.66 per share as of March 27. The final pricing of the deal is subject to Brand Group's divestiture of certain assets.

Under the deal terms, shareholders of Brand Group will receive 32.87 shares of Renasant common stock and $77.50 in cash for each share of Brand Group common stock. Moreover, all Brand Group's options will be cashed out at $1,550 per share.

Prior to closing, $54.8 million of Brand Group's classified assets will be sold at current book balance, and the company's mortgage unit will be divested, according to an investor presentation.

On an aggregate basis, SNL calculates the deal to be 235.5% of book and tangible book, and 38.1x earnings. The deal price is 18.80% of assets, 23.65% of deposits and the tangible book premium-to-core deposits ratio is 15.48%.

For comparison, SNL valuations for bank and thrift targets in the Southeast region between March 28, 2017, and March 28, 2018, averaged 158.31% of book, 166.47% of tangible book and had a median of 25.14x last-12-months earnings, on an aggregate basis.

The transaction is anticipated to be immediately accretive to Renasant's estimated earnings, excluding one-time transaction costs. However, Renasant expects double-digit EPS accretion once cost savings are fully realized, which could happen in 2019. Pretax merger expenses are estimated to be $42 million. The company also expects a mid-single digit dilution to tangible book value per share, with an earn back period of 3.0 years. The internal rate of return is expected to be more than 20%.

The deal is expected to close in the third quarter, subject to regulatory and Brand Group shareholder approvals.

Upon completion, Renasant shareholders will own 83.5% of the combined company, while Brand Group shareholders will own the remaining 16.5%. Key members of Brand Group's management will also remain with Renasant.

Bartow Morgan Jr., CEO of Brand Group and unit Brand Banking Co., will become chief commercial banking officer of Renasant Bank, a subsidiary of Renasant Corp. He will also join Renasant Bank's board. In addition, one independent director of Brand Group Holdings will be appointed to the boards of both Renasant Corp. and Renasant Bank.

Richard Fairey, president and COO of Brand Group and Brand Banking, will be appointed as chief retail banking officer for Renasant Bank. Mike Dunlap, executive vice president and director of commercial banking of Brand Banking, will be named as president of Renasant Bank's Georgia commercial banking group.

Renasant will expand in Gwinnett County, Ga., by seven branches to be ranked third with a 12.16% share of approximately $16.11 billion in total market deposits. It will also enter Hall County, Ga., with one branch to be ranked No. 13 with a 1.49% share of approximately $3.52 billion in total market deposits.

As of Dec. 31, 2017, Renasant Bank had $9.81 billion in assets, while Brand Banking had $2.40 billion in assets, according to SNL data.

Keefe Bruyette and Woods Inc. and Phelps Dunbar LLP served as Renasant's financial adviser and legal adviser, respectively. Evercore served as lead financial adviser to Brand Group, and Troutman Sanders LLP served as its legal adviser. Banks Street Partners LLC also served as financial adviser to Brand Group.

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