Owensboro, Ky.-based First Security Inc. has agreed to merge into Jasper, Ind.-based German American Bancorp Inc. in a cash-and-stock deal valued at about $101.0 million.
The total merger consideration will be split between stock and cash on roughly a 70-to-30 basis. The deal has a value of $40.00 per First Security common share based on the 20-day volume weighted average price of German American's common shares ending May 18 of $35.08 per share. German American expects to issue about 2.0 million common shares and pay about $31 million in cash for all the issued and outstanding common shares and outstanding options of First Security. First Security common shareholders will receive a fixed exchange ratio of 0.7982 of a German American common share for each First Security share in a tax-free exchange and a cash payment of $12.00 per First Security share.
On a per-share basis, SNL calculates that the deal value is 153.5% of book value and 165.1% of tangible book. Also, the value is calculated to be 17.92% of assets, 22.95% of deposits and the tangible book premium-to-deposits ratio is 9.04%.
For comparison, SNL valuations for bank and thrift targets in the Southwest region between May 22, 2017, and May 22, 2018, averaged averaged 130.47% of book and 130.47% of tangible book and had a median of 78.05x last-12-months earnings, on a per-share basis.
The deal has a one-day premium of 49.04% and a one-month premium of 49.60%.
After the deal closes, a First Security board member will join German American's board, and First Security President and CEO Michael Beckwith will take on a newly established role as Kentucky divisional president. First Security Bank Inc. will merge with and into German American Bank at deal closing.
The deal expands German American's business into Owensboro, Bowling Green and Lexington, Ky. German American will expand in Indiana by three branches to be ranked No. 16 with a 2.14% share of approximately $124.44 billion in total market deposits, and will expand in Kentucky by eight branches to be ranked No. 44 with a 0.46% share of approximately $79.29 billion in total market deposits. The deal is expected to close in the fourth quarter and be accretive to German American's earnings per share during the 12 months after closing.
Sandler O'Neill & Partners LP served as German American's financial adviser, and Bingham Greenebaum Doll LLP served as legal counsel. Raymond James & Associates Inc. served as First Security's financial adviser, and Frost Brown Todd LLC served as legal adviser.
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