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SouthState (SSB) to Acquire Independent Bank for $2 Billion

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SouthState Corporation (SSB - Free Report) entered into a merger agreement to acquire Independent Bank Group, Inc. (IBTX - Free Report) in an all-stock transaction valued at approximately $2 billion.

Independent Bank is headquartered in McKinney, TX, and had $18.9 billion in total assets, $15.7 billion in total deposits and $14.6 billion in total loans as of Mar 31, 2024.

Upon completion of the acquisition, the combined company will have pro forma total assets of $65 billion, deposits of $55 billion, gross loans of $48 billion and a market capitalization of approximately $8.2 billion, based on the closing share price of SSB as of May 17, 2024.

Terms of the Agreement

Per the agreement, IBTX stockholders will receive 0.60 shares of SSB’s common stock for each outstanding share of IBTX common stock held. This values the deal at $48.51 per share based on SSB’s closing price of $80.85 on May 17, 2024.

Additionally, three of the IBTX’s directors will join the SouthState Corporation board and the SouthState Bank board.
Completion of this transaction is subject to customary closing norms, including obtaining necessary regulatory approvals and consent by both SSB and IBTX’s shareholders. The transaction is expected to close by the end of first-quarter 2025.

Benefits of the Deal

The company expects EPS accretion of 27.3% by 2025.

According to the consensus estimates, for the remaining periods of 2024 and 2025, SouthState is expected to achieve a 5% annual net income growth, while IBTX is anticipated to see a similar annual growth of 5% in the long run.

At deal closing, the common equity tier 1 ratio is expected to be 10.4%, the total risk-based capital ratio to be at 12.8% and the loan-to-deposit ratio will be 89%. Cost savings of 25% of Independent Bank’s non-interest expenses base is expected.

The acquisition will further help SSB to diversify its footprint into similar high-growth regions.

Management Comments

Chairman and chief executive officer (CEO) of Independent Bank Group, David R. Brooks, stated, "We are excited about the opportunity to join SouthState, a company whose culture, business model and credit discipline matches well with ours." He also added, “The combination of these two companies operating in growing markets provides a great opportunity for our Independent Bank Group teammates, clients and communities to flourish."

CEO of SSB, John C. Corbett, stated, "With a local, geographic management model, an industry-leading track record on credit and a presence in some of the best markets in the country, Independent Bank Group is a great fit with SouthState."

Our Take

SouthState’s efforts to grow inorganically will aid its finances in the long run. Through this buyout, the bank will be able to expand its offerings and its geographical footprints, eventually leading to top-line growth and increased market share. However, the current volatility of the market may act as a spoilsport.

In the past six months, SSB’s shares have gained 8.5% compared with the industry’s growth of 14.6%.  Zacks Investment Research
Image Source: Zacks Investment Research

Currently, SSB carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inorganic Expansion Efforts by Other Banks

UMB Financial Corporation (UMBF - Free Report) and Heartland Financial, USA Inc. (HTLF - Free Report) entered a definitive merger agreement for UMBF to acquire Heartland Financial in an all-stock transaction valued at around $2 billion.

Per the terms of the merger agreement, HTLF stockholders will receive 0.55 shares of UMBF’s common stock for each share of HTLF common stock held. This values the deal at $45.74 per share based on UMBF’s closing price of $83.17 on Apr 26, 2024.

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