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First Community upped offer to help secure acquisition of Highlands

Bluefield, Va.-based First Community Bankshares Inc. acquired Abingdon, Va.-based Highlands Bankshares Inc. and unit Highlands Union Bank in an all-stock deal valued at about $91.0 million.

The acquisition process with First Community started in early May when five financial institutions submitted initial indications of interest to partner with Highlands. One of the five companies was First Community, which proposed a bid price in the range of $8 to $9 per share of Highland stock. The bid was beaten by two other parties.

On May 20, First Community revised its interest indication to Highlands and increased the value range of its bid to $8.75 to $9.35 per share of Highlands stock in an effort to eliminate other bidders and avoid a second round of bidding. On May 21, Highlands' board held a meeting to evaluate each of the five indications of interest. The board noted First Community's competitive revised offer and the company's desire to move forward with the definitive merger agreement.

Despite some board members wanting Highlands to continue as a stand-alone institution, the majority of the board concluded that it was in the best interest of Highlands and its shareholders to move forward exclusively with First Community. On May 24, Highlands signed an indication of interest with First Community committing to a 60-day exclusivity period.

In July, the companies worked on the terms and details of the agreement and submitted drafts. On July 23, Highlands held a meeting to consider the drafts and vote on whether they should continue the deal. The 4-3 vote in favor of a merger did not meet First Community's conditions for the deal agreement to continue, so the merger was called off.

Negotiations were renewed in August after the Highlands board had implemented a change in control agreement. On Aug. 15, the Highlands board met to discuss the renewed First Community proposal, which had not otherwise changed.

From late August to September the companies tried to work out the details of the merger, which included termination fees affiliated with Highlands' core processor agreement. Once the fees had been decided, the merger agreement took place on Sept. 11 and was announced by the companies Sept. 12.