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Regulatory delays caused Anchor to pull out from Washington Federal deal


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Regulatory delays caused Anchor to pull out from Washington Federal deal

More than two months after announcing the deal on April 11, 2017, the acquirer, Seattle-based Washington Federal Inc., informed the seller, Lacey, Wash.-based Anchor Bancorp, that the Office of the Comptroller of the Currency had chosen to use a longer time period to evaluate the bank merger application.

Later on July 18, 2017, Anchor had a board meeting and it was reported that Washington Federal had not heard back from the OCC.

As a result of the regulatory delays, the merger agreement was amended twice — in September 2017 and in April 2018. The first amendment was made to push back the merger's termination date to June 30, 2018, and the second was to postpone the date to Aug. 31, 2018, after which either Anchor or Washington Federal may call off the deal if it was still pending. The new terms also gave Anchor the right to look into possible deals with other would-be buyers until July 31, 2018.

Keefe Bruyette & Woods, Anchor's adviser, after the second amendment on April 2, contacted nine companies concerning a potential alternative transaction with Anchor. Five of those companies signed non-disclosure agreements, including FS Bancorp Inc. The Mountlake Terrace, Wash.-based company signed a non-disclosure agreement on April 4.

After receiving four non-binding letters of intent from the interested parties and choosing to move ahead with FS Bancorp, Anchor had discussions with Washington Federal on July 11, where Washington Federal was informed that Anchor was proceeding with an alternative transaction and proposed a mutual termination agreement. The merger agreement between Washington Federal and Anchor was later terminated on July 17.

Also on July 17, FS Bancorp announced its proposed acquisition of Anchor in a cash-and-stock deal valued at about $77 million.

Under the new deal, each Anchor common share will receive fixed consideration comprising 0.2921 of an FS Bancorp common share and $12.40 per share in cash. In aggregate, FS Bancorp will pay consideration of 725,585 common shares and $30.8 million in cash. Based on the 10-day volume weighted average closing price of FS Bancorp common stock of $63.68 on July 13, the consideration value for Anchor was $77.0 million, or about $31.00 apiece. Anchor shareholders would hold, in aggregate, around 16% of outstanding FS Bancorp common stock following the merger based on March 31 data.

Anchor will pay FS Bancorp approximately $2.7 million if the deal is terminated under certain circumstances.