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Heartland Financial-First Bank Lubbock deal mostly a straightforward matter

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Heartland Financial-First Bank Lubbock deal mostly a straightforward matter

Dubuque, Iowa-based Heartland Financial USA Inc.'s pending acquisition of Lubbock, Texas-based First Bank Lubbock Bancshares Inc. was a pretty straightforward matter.

In July 2015, representatives of Stephens Inc. introduced First Bank Lubbock to Heartland. First Bank Lubbock had been reviewing its business strategies, while Heartland had plans of expanding its banking operations in Texas.

In May 2017, Heartland and First Bank Lubbock signed a nondisclosure agreement. Two months later, the two companies began discussing the merits of a potential merger.

In September 2017, Heartland submitted a nonbinding letter of intent to First Bank Lubbock. The company proposed an exchange ratio of 3.0934 shares of its common stock for every First Bank Lubbock common share held, plus $17.5 million in cash consideration, based on Heartland's Sept. 28, 2017, closing price. The deal was then valued at around $183.0 million.

The next three months were spent on negotiating the deal terms. During these negotiations, Heartland identified issues regarding First Bank Lubbock's "S corporation" election, wherein certain trusts failed to timely file election forms connected to their acquisition of the company's common shares in previous years. First Bank Lubbock agreed to seek determination from the Internal Revenue Service that the failures were inadvertent and that the company's "S corporation" qualification was effective at all times.

On Dec. 12, 2017, the two companies executed the merger agreement and then announced the deal after markets closed that day. The deal is valued at around $185.6 million, based on Heartland's Dec. 11, 2017, closing price.