In Indiana, Muncie-based MutualFirst Financial Inc. will acquire Bloomfield-based Universal Bancorp for approximately $65.6 million in cash and stock, based on the buyer's closing stock price of $39.30 on Oct. 2.
Under the deal, each Universal share may be exchanged for 15.6 MutualFirst common shares, plus $250.00 in cash.
Universal's subsidiary BloomBank will merge into MutualBank, creating a combined company with $2 billion in assets and 40 branches. BloomBank had $398.3 million in assets as of June 30; MutualBank had $1.57 billion.
The transaction is expected to be accretive to MutualFirst's 2018 EPS. If cost savings of 25% of BloomBank's noninterest expense are realized in 2019, the accretion is estimated to be 13%. Tangible book value dilution at closing is pegged at 3.1%, to be earned back in about 2.2 years as calculated under the crossover method. The transaction assumptions also include a gross loan credit mark of $4.4 million.
SNL valuations for bank and thrift targets in the Midwest region between Oct. 4, 2016, and Oct. 4, 2017, averaged 149.06% of book, 154.26% of tangible book and had a median of 19.74x last-12-months earnings, on an aggregate basis.
The companies calculate the price as 158% of tangible book value and 22.9x last-12-months earnings, or 14.8x last-12-months earnings after cost savings. They noted the core deposit premium would be 8.5%, and they expect an internal rate of return of about 18%.
On an aggregate basis, SNL calculates that the deal value is 151.6% of book, 158.5% of tangible book, and 23.0x earnings. The deal price is 20.32% of deposits, 16.54% of assets and the tangible book premium-to-core deposits ratio is 9.07%.
MutualFirst will expand in Indiana by 13 branches to be ranked No. 22 with a 1.19% share of approximately $118.78 billion in total market deposits.
The merger, which is still subject to regulatory and shareholder approvals, is expected to close in the first quarter of 2018. The combined company would be 86% owned by MutualFirst shareholders and 14% owned by Universal shareholders. Two directors from Universal would join MutualFirst's board.
Keefe Bruyette & Woods, led by Harold Hanley, was MutualFirst's financial adviser, while Silver Freedman Taff & Tiernan LLP, represented by Jim Fleischer, was its legal counsel. Boenning & Scattergood Inc. was financial adviser to Universal Bancorp, with Charlie Crowley, Michael Voinovich and Christopher Chapman as lead bankers; SmithAmundsen, represented by Larry Tomlin, acted as its legal counsel.
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