Poplar Bluff, Mo.-based Southern Missouri Bancorp Inc. plans to acquire Dexter, Mo.-based Gideon Bancshares Co. in a cash-and-stock deal valued at about $22.7 million.
Gideon has 10 locations in southeastern Missouri and consolidated assets of $223 million, including loans of $145 million and deposits of $176 million as of March 31. On a pro forma basis, the combined company's total assets will be about $2.1 billion, with total net loans of $1.7 billion and total deposits of $1.8 billion.
Gideon shareholders will receive 2.0486 Southern Missouri common shares and $72.79 in cash for each Gideon common share, subject to adjustment for Gideon's capital at closing and assuming all minority shareholders of First Commercial Bank, of which Gideon owns 92%, exchange their interest for Gideon stock before closing. The deal value is based on the $35.53 per share average closing price of Southern Missouri common stock for the most recent 20 trading days ending on and including the fifth trading day before the merger agreement was executed. The deal value equates to 97.5% of Gideon's capital as adjusted at closing.
Southern Missouri President and CEO Greg Steffens said in a release that the consideration represents a multiple of 9.0x Gideon's expected earnings for the 12 months ending Dec. 31, 2019. Additionally, the company expects about 1% dilution to tangible book value per common share at closing, with an expected earnback period of about one year. The deal is expected to be immediately accretive to earnings per share, with an increase of about 5% expected after realizing all cost savings.
SNL calculates the deal value to be 106.4% of common equity, 114.1% of tangible common equity and 15.4x earnings, on an aggregate basis. The deal value is also 10.19% of assets and 12.84% of deposits. The tangible book premium-to-core deposits ratio is 1.80%.
For comparison, SNL valuations for bank and thrift targets in the Midwest region between June 12, 2017, and June 12, 2018, averaged 166.68% of book, 179.02% of tangible book and had a median of 20.50x last-12-months earnings, on an aggregate basis.
Southern Missouri will expand in New Madrid County, Mo., by two branches to be ranked second with a 23.82% share of approximately $336.8 million in total market deposits. The company will enter Scott County, Mo., with four branches to be ranked sixth with a 6.38% share of approximately $705.6 million in total market deposits. In addition, Southern Missouri will expand in Stoddard County, Mo., by four branches to be ranked second with a 22.51% share of approximately $757.1 million in total market deposits.
First Commercial President Brett Dorton is expected to join Southern Bank's executive management team.
The deal is expected to close in the fourth quarter. The firm of Yewell G. Lawrence served as Gideon's legal adviser. Silver Freedman Taff & Tiernan LLP served as legal adviser to Southern Missouri.