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GulfShore asked for a better price before signing Seacoast deal

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GulfShore asked for a better price before signing Seacoast deal

While Seacoast Banking Corp. of Florida was among prospective buyers GulfShore Bancshares Inc. met with for informal talks during the past five years, Stuart, Fla.-based Seacoast did not submit any acquisition proposal to GulfShore, nor did any of the other institutions that the Tampa, Fla.-based company talked to during that timeframe.

After an initial phase of deciding that it would continue an organic growth strategy during the first half of 2016, GulfShore started the ball rolling on a prospective sale in August, enlisting Sandler O'Neill & Partners as financial adviser. GulfShore entered into nondisclosure agreements for due diligence efforts with nine prospective buyers, including Seacoast.

After several meetings, GulfShore decided to continue talks with three companies, Seacoast included, on the condition that all indicate a willingness to enhance their proposed pricing and transaction structures. The three final bidders presented indications, which included either all stock, or a stock and cash mix, and with pricing ranging from approximately $9.00 to $10.28 per GulfShore share.

Around late September, following several discussions, one of the bidders dropped out of the race, due to an inability to raise its pricing from its initial letter of intent. A little later, the other bidder also decided to discontinue discussions with GulfShore, but did not provide a reason why.

Seacoast provided a final, nonbinding, indication of interest for the purchase of GulfShore on Oct. 19. The total offer value, including value of options, was $53.9 million, equating to $9.65 per GulfShore share, and the proposed consideration was a mix of 75% stock and 25% cash. The pricing represented a deal value per GulfShore share equal to the last twelve month's net income per share multiple of 37.6x; and a deal value per share to Sept. 30, tangible book value ratio per share of 144%. Sandler O'Neill also observed that in calculating a normalized tangible book value target of 9% (GulfShore's exceeded 11%), with all excess tangible common equity being paid dollar for dollar, Seacoast's proposal represented a tangible book value multiple of 154%.

After deliberation, the board of GulfShore requested an improved proposal with an increased price per share from Seacoast. Seacoast responded with a revised offer of $9.80 per GulfShore share with consideration to consist of an 85% common stock and 15% cash mix, which the GulfShore board voted to accept.

More meetings and due diligence efforts followed. There was also substantial discussion regarding the restrictive covenant agreement and voting agreement that Seacoast was requiring each GulfShore director to execute. It was later agreed that, under the voting agreement, each director would be permitted to vote a portion of his or her shares (53.37%) against the merger under certain circumstances relating to receipt of a competing proposal that was superior to the Seacoast merger. The two parties also agreed to potential revisions of the covenant agreement. This was early November.

The two companies then executed the merger agreement Nov. 3 and announced the transaction the next day.