Bowie, Md.-based Old Line Bancshares Inc. struck a $40.7 million deal to acquire Damascus, Md.-based DCB Bancshares Inc.
The deal value represents approximately $25.22 per DCB Bancshares common share. Each DCB Bancshares common share will be exchanged for a number of Old Line Bancshares shares calculated by dividing 160% of the tangible book value of each DCB share at Dec. 31, 2016, by the weighted average closing price of Old Line Bancshares common stock for the 10 trading days ending two trading days before the closing, subject to a minimum average price of $20.85 per share and a maximum average price of $27.21 per share, which will be considered the average price. This results in a minimum of 0.9269 Old Line Bancshares shares for each DCB share if the average price is $27.21 or more and as high as 1.2096 Old Line Bancshares shares for each DCB share if the average price is $20.85 or less.
Based on SNL data, the deal value is 160.8% of book and tangible book on a per-share basis, 37.2x earnings, and 37.1x last-12-months core earnings. It is also 14.72% of deposits and 13.11% of assets and has a tangible book premium-to-core deposits ratio of 7.25%. The one-day premium is 98.80%, based on DCB Bancshares' closing price of $12.50 on Jan. 31, and the one-month premium is 104.53%, based on DCB Bancshares' closing price of $12.15 on Jan. 3.
SNL Valuations for bank and thrift targets in the Mid-Atlantic region between Feb. 1, 2016, and Feb. 1, 2017, averaged 134.90% of book, 139.83% of tangible book and had a median of 21.27x LTM earnings, on an aggregate basis. On a per-share basis, valuations averaged 124.39% of book, 130.45% of tangible book and had a median of 20.53x LTM earnings.
In addition to mutual termination rights, DCB may terminate the transaction if two adverse market price conditions are satisfied, subject to Old Line Bancshares' right to cure by agreeing to an exchange ratio that assumes an average price of $16.68.
Excluding merger-related expenses, the transaction is expected to be immediately accretive to Old Line Bancshares' tangible book value and immediately accretive to its earnings.
The deal is expected to close sometime in the middle of the year. Once the merger closes, Damascus Community Bank will merge into Old Line Bank. In addition, DCB and Damascus Community Bank Chairman Stephen Deadrick, along with another member of the DCB board, will become directors of resulting institutions Old Line Bancshares and Old Line Bank. The deal is also still subject to approval from applicable regulators and DCB Bancshares' shareholders.
As of Dec. 31, 2016, DCB Bancshares had consolidated assets of approximately $311 million, while Old Line Bancshares had consolidated assets of $1.7 billion. Damascus Community Bank has six banking locations while Old Line Bank has 21 offices.
The combined company is expected to have roughly $2 billion in assets, 27 full-service branches, which would make it the third-largest Maryland-based independent commercial bank with the second-most banking locations in the state among other independent Maryland-based commercial banks.
Ambassador Financial Group Inc. acted as financial adviser to Old Line Bancshares and Baker Donelson Bearman Caldwell & Berkowitz PC acted as legal counsel. RP Financial LC acted as financial adviser and provided the fairness opinion to DCB Bancshares and Gordon Feinblatt LLC was legal counsel.