Baton Rouge, La.-based Investar Holding Corp. agreed to acquire Jackson, La.-based BOJ Bancshares Inc. and unit Highlands Bank, in a cash-and-stock transaction valued at approximately $22.1 million, based on the closing price of Investar's common stock Aug. 4.
BOJ Bancshares shareholders will be entitled to receive an aggregate amount of cash consideration equal to $3.95 million, subject to certain adjustment, as well as an aggregate of 799,559 shares of Investar common stock, subject to adjustment based upon fluctuations in Investar's average closing price for the 10 consecutive trading days prior to the closing date. Following the acquisition, BOJ Bancshares shareholders are expected to own approximately 9% of the combined company.
SNL calculates that the deal value is 131.9% of book and tangible book and 20.6x earnings, on an aggregate basis. It is 17.73% of deposits and 14.69% of assets; the premium to tangible book is 5.69% of core deposits. For comparison, SNL's valuations for bank and thrift targets in the Southwest between Aug. 7, 2016, and Aug. 7, 2017, averaged 156.66% of book, 173.40% of tangible book and had a median of 20.13x last-12-month earnings, on an aggregate basis.
As of June 30, BOJ Bancshares had approximately $150 million in assets, $104 million in net loans, $124 million in deposits and $17 million in stockholders' equity. It has five branches. Meanwhile, Investar had approximately $1.23 billion in assets and 15 branches, according to S&P Global Market Intelligence data.
Investar Holding will expand in East Baton Rouge Parishes, La., by two branches to be ranked sixth with a 2.61% share of approximately $15.7 billion in total market deposits, will enter East Feliciana Parishes, La., with two branches to be ranked second with a 30.90% share of approximately $246.9 million in total market deposits and will enter West Feliciana Parishes, La., with one branch to be ranked second with a 20.27% share of approximately $148.6 million in total market deposits.
The deal is expected to be completed in the fourth quarter, subject to the approvals of BOJ Bancshares shareholders and bank regulators.
Upon deal completion, Highlands Bank will transition to the Investar Bank name. Highland Bank's branch staff is expected to be retained.
Investar estimates annual pretax expense reductions associated with the transaction will approximate 30% of Highlands Bank's annual noninterest expenses. In addition, Investar projects expense savings to be fully achieved beginning in 2018 and expects the transaction to be immediately accretive to 2018 EPS and accretive to tangible book value at closing.
Highlands Bank President and CEO Mike Creed will maintain "a vital and influential role for the combined organization," Investar President and CEO John D'Angelo said in the merger release.
Sandler O'Neill & Partners LP acted as financial adviser to Investar, and Fenimore Kay Harrison & Ford LLP served as legal counsel. Kantrow Spaht Weaver & Blitzer (APLC) served as legal counsel to BOJ Bancshares.