After purchasing a majority stake in Bank of Rio Vista in 2017, Lodi, Calif.-based Farmers & Merchants Bancorp agreed to acquire the Rio Vista, Calif.-based bank.
Under the terms of the deal, shareholders of Bank of Rio Vista owning 2,414 shares, or 60.35% of the outstanding common shares, will receive $28.7 million in cash subject to certain adjustments.
SNL calculates the deal value to be 174.2% of book and tangible book and 21.7x earnings, on an aggregate basis. It is also 21.75% of assets and 24.99% of deposits, with a premium to tangible book that is 11.35% of core deposits. For comparison, SNL valuations for bank and thrift targets in the West between March 26, 2017, and March 26, 2018, averaged 187.11% of book, 195.31% of tangible book and had a median of 25.28x last-12-months earnings, on an aggregate basis.
In 2017, Farmers & Merchants Bancorp purchased 1,586, or 39.65%, of the outstanding common shares of Bank of Rio Vista for $12.0 million. As a result, the total price paid for all common shares of Bank of Rio Vista is $40.7 million, or 1.42x the minimum book value that must be delivered at close.
The deal is expected to close in the third quarter, subject to regulatory approvals and the approval of Bank of Rio Vista's shareholders. Farmers & Merchants Bancorp expects the acquisition to be accretive to earnings in 2019, the first full year of combined operations.
As a result of the transaction, Bank of Rio Vista will become a wholly owned subsidiary of Farmers & Merchants Bancorp, which had approximately $3.08 billion in total assets as of Dec. 31, 2017.
Farmers & Merchants Bank of Central California will continue to operate as a wholly owned subsidiary of Farmers & Merchants Bancorp. Within the state, Farmers & Merchants Bancorp will expand in Sacramento County by one branch, to be ranked No. 11 with a 1.21% share of approximately $32.45 billion in total market deposits, and expand in San Joaquin County with one branch, where it will rank fourth with a 13.97% share of approximately $10.01 billion in total market deposits. The acquirer will also enter Solano County with one branch, to be ranked ninth with a 2.73% share of approximately $4.50 billion in total market deposits.
Farmers & Merchants Bancorp's board and Farmers & Merchants Bank of Central California's executive management team will continue to lead the combined team. Bank of Rio Vista Chairman and CEO Dave Greiner, who is also a director of the bank, will work with Farmers & Merchants Bancorp as an adviser through the integration process.
One member of Bank of Rio Vista's board is expected to join the board of Farmers & Merchants Bank of Central California. In addition, an advisory board, comprised of certain existing Bank of Rio Vista directors, will be established for the Rio Vista, Delta and River communities in Central California.
As of Dec. 31, 2017, Farmers & Merchants Bancorp on a pro forma consolidated basis with Bank of Rio Vista would have had approximately $3.3 billion in total assets, with 32 locations serving California's Central Valley and San Francisco East Bay Area regions.
Pillsbury Winthrop Shaw Pittman served as Farmers & Merchants Bancorp's legal counsel. D.A. Davidson & Co. served as Bank of Rio Vista's financial adviser, while Weintraub Tobin served as the bank's legal counsel.
SNL is an offering of S&P Global Market Intelligence.