Renasant Corporation (RNST - Free Report) and Heritage Financial Group jointly announced a definitive merger agreement wherein the former will acquire the latter in an all-stock deal worth approximately $258 million. The merger is expected to qualify as a tax-free reorganization for Heritage stockholders.
According to the terms of the merger, each share of Heritage Financial will earn 0.9266 shares of Renasant. Thus, based on the 20-day average closing price of Renasant stock, which is $29.14 per share as of Dec 9, 2014, the approximate value of the deal comes to $258 million.
Following the merger of Heritage Financial with Renasant, Heritage Bank will merge into Renasant Bank.
O. Leonard Dorminey, the President and CEO of Heritage, will serve as Executive Vice President of Renasant Corporation as well as the President of Renasant Bank’s Georgia region.
The merger, which is expected to close in third-quarter 2015, has been approved by the board of directors of both Renasant and Heritage, but is subject to approval from shareholders of both parties and regulatory authorities.
Renasant Corporation, the parent company of Renasant Bank and Renasant Insurance, has over 120 banking, mortgage, financial services and insurance offices spread across Mississippi, Tennessee, Alabama and Georgia.
The merger will increase Renasant’s assets to $7.5 billion and its number of offices to 171 along with an entry into the newer markets of Albany, Statesboro and Savannah in Georgia, Auburn in Alabama, and Ocala and Gainesville in Florida. It will also enhance the company’s presence in the metro markets of Birmingham, AL and Atlanta, GA. So the Renasant’s position as a community bank in the Southeast will get strengthened.
Moreover, the company will also gain access to low-cost core deposits, which could be a major benefit of the merger, given the current sluggishness in the deposit market.
Financially, the transaction is expected to be accretive to Renasant’s earnings per share with an IRR (internal rate of return) which is higher than the internal thresholds. Also, the company expects to earn back its estimated tangible book value dilution within two years.
Heritage believes that the merger will benefit it with greater resources and a larger scale of operation. Considering its strong fundamentals, superior service and a history of profitable growth along with a same community bank culture, the company expects an improved growth post the merger.
Renasant’s last acquired Fist M&F Corp in the third quarter of 2013, following which the company reported increased profits. On the same basis, we expect Renasant’s performance to improve after acquiring Heritage.
Renasant currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the finance space include Fidelity Southern Corp. (LION - Free Report) and Investar Holding (ISTR - Free Report) each sporting a Zacks Rank #1 (Strong Buy).