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Cadence offering more shares to acquire State Bank, but deal value falls 38%

Houston-based Cadence Bancorp. is offering 4.3 million more common shares to State Bank Financial Corp. shareholders in its deal to acquire the Atlanta-based company.

State Bank shareholders will now receive 1.271 shares of Cadence class A common stock for each State Bank common share, up from 1.160 Cadence class A common share as contemplated by the May 13 announcement. The revised terms will give legacy State Bank shareholders 37% stake in the combined company, up from 35%, when the deal closes.

Despite the higher number of common shares being offered, the deal value has declined 38% to $849 million from $1.37 billion, as Cadence's stock price has fallen more than 43% since the deal was announced. According to Cadence's calculations, the adjusted terms peg the deal value at 9.2x 2019 EPS and 1.5x tangible book value, and the core deposit premium is now 6.9%. Originally, the deal price represented 14.7x 2019 EPS and 2.5x tangible book value, and the core deposit premium was 20.4%.

The deal will be 5% accretive to GAAP EPS for 2020, Cadence said.

Cadence's board has authorized the company to repurchase the 4.3 million additional shares being issued by the company. The merger is now expected to close Jan. 1, 2019.