Chico, Calif.-based TriCo Bancshares is acquiring FNB Bancorp of South San Francisco, Calif., in an all-stock transaction. The deal is valued at approximately $40.81 per share or $315.3 million in aggregate, based on the buyer's Dec. 8 closing price of $41.64 per share.
Under the terms of the deal, each FNB share will be exchanged for 0.980 share of TriCo common stock. The exchange ratio is fixed, but subject to a trading collar that allows the parties to terminate the merger if TriCo's weighted average stock price is less than $33.18 or more than $49.78, among other conditions.
SNL calculates that the deal value is 249.3% of book, 259.9% of tangible book and 24.2x earnings. According to SNL analysis, the one-day premium on the deal is 15.47%, based on FNB's closing price of $35.34 on Dec. 8. The one-month premium on the deal is 20.30%, based on FNB's closing price of $33.92 on Nov. 13.
For comparison, SNL valuations for bank and thrift targets in the West region between Dec. 11, 2016, and Dec. 11, 2017, averaged 176.88% of book, 190.42% of tangible book and had a median of 22.44x last-12-months earnings, on an aggregate basis, and averaged 171.61% of book, 182.88% of tangible book and had a median of 24.12x last-12-months earnings, on a per-share basis.
TriCo and FNB are the respective parent companies of Tri Counties Bank and First National Bank Northern California. As of Sept. 30, TriCo had $4.7 billion in total assets, $2.9 billion in gross loans and $3.9 billion in deposits. FNB had $1.3 billion in total assets, $800 million in gross loans and $1.0 billion in deposits. The resulting entity is expected to have approximately $6.1 billion in assets, $5.0 billion in deposits, $3.7 billion in gross loans and 78 California branches. TriCo will enter the San Francisco Bay Area through the deal, and FNB's shareholders will own approximately 24% of the resulting entity.
TriCo will enter San Mateo County, Calif., with eight branches to be ranked 10th with a 2.13% share of approximately $38.48 billion in total market deposits. It will also enter San Francisco County, Calif., with three branches to be ranked No. 24 with a 0.08% share of approximately $212.30 billion in total market deposits, and will enter Santa Clara County, Calif., with one branch to be ranked No. 36 with a 0.03% share of approximately $134.87 billion in total market deposits.
The deal, which is still subject to regulatory and shareholder approvals, is expected to result in cost saves of approximately 28% of FNB's noninterest expenses. If the cost saves are achieved, the transaction should be 2% accretive to 2018 earnings, excluding transaction costs, and 8% accretive to 2019 earnings. Tangible book value dilution is calculated to be earned back in 4.7 years, based on the crossover method.
Two FNB directors are expected to join TriCo's board.
Stephens Inc. and Sheppard Mullin Richter & Hampton LLP served as TriCo's financial adviser and legal counsel in this transaction. For FNB, it was The Courtney Group and Dodd Mason George LLP.
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