In an effort to expand its presence geographically, BancorpSouth Bank (BXS - Free Report) has entered an agreement to acquire Merchants Trust, Inc. and its wholly-owned subsidiary, Merchants Bank. Along with this, it will acquire Casey Bancorp, Inc. and its subsidiary, Grand Bank of Texas.
The deals, which are subject to shareholder approval and certain customary closing conditions, are expected to be completed in the first half of 2019.
Once the transactions are completed, both Merchants Trust and Casey Bancorp, along with their subsidiaries, will be merged with BancorpSouth.
Terms of the Mergers
For the acquisition of Merchants Trust, BancorpSouth will likely issue 950,000 shares of its own common stock for all outstanding shares of Merchants Trust’s capital stock. Along with this, BancorpSouth is expected to pay $8 million in cash, subject to certain conditions and adjustments. The total deal value, which has been set at $37.5 million, provides for a collar that ranges from $37.5 million to $43 million.
In respect to the Casey Bancorp deal, BancorpSouth will issue 1,275,000 shares of its own common stock for all outstanding shares of Casey Bancorp’s capital stock. Along with this, BancorpSouth is expected to pay $11 million in cash, subject to certain conditions and adjustments. For this one, the deal value is $51.75 million and provides for a collar that ranges between $51.75 million and $56.75 million.
For both mergers, if there is a need to accommodate the respective boundaries of the collars then the share count can be adjusted downward or the cash consideration can be adjusted upward.
Based in Jackson, AL, Merchants Trust currently has six full-service banking offices in Clarke and Mobile counties. On the other hand, Casey Bancorp, which is based in Texas, operates four full-service banking offices in the cities of Dallas, Grand Prairie, Horseshoe Bay and Marble Falls.
Post the mergers, BancorpSouth will be able to further expand its operations in the above-mentioned regions and also enter new markets.
Commenting on the Merchants Trust deal, BancorpSouth’s chairman and chief executive officer, Dan Rollins informed, “Through this merger, we'll be able to leverage our combined strengths in Southwest Alabama, which is a strategically important market for BancorpSouth. I want to commend Merchants' leadership and teammates on their extraordinary efforts to help their customers and communities grow. I'm confident that we'll be able to continue to build on their track record of success.”
Additionally, in respect to the second merger, he stated, “The team at Grand Bank is widely respected for its expertise and abilities, and we're confident that they'll make a great addition to the BancorpSouth family. This merger will give us an opportunity to expand our presence in the thriving Dallas-Fort Worth market, as well as position us for greater success in the Texas Hill Country.”
Notably, post the mergers, Michael Casey will continue to serve as the chairman for the Dallas area of BancorpSouth. Joe Bedwell will be the chairman in Clarke County while Jim Reid, who is the president & chief financial officer of Merchants Bank, will serve as BancorpSouth's president in Clarke County.
Driven by a solid liquidity position, BancorpSouth has been making strategic investments through mergers and acquisitions since the past few years. The company has maintained an acquisition spree, fortifying its footprint in various areas. These transactions, along with the new ones, are anticipated to continue to be accretive to earnings.
Shares of the company have lost 8.1% so far this year compared with 4.7% decline of the industry.
Currently, the stock carries a Zacks Rank #3 (Hold).
A few better-ranked stocks from the finance space are Citigroup Inc. (C - Free Report) , JPMorgan Chase & Co. (JPM - Free Report) and U.S. Bancorp (USB - Free Report) . Each of these companies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Over the past 60 days, Citigroup has witnessed an upward earnings estimate revision of 1.8% for the current year. Its shares have gained 16.8% in the past two years.
JPMorgan’s earnings estimates for 2018 have been revised 1.4% upward over the past 60 days. Shares of the company have gained 18% in the past two years.
U.S. Bancorp’s share price has increased nearly 10.3% in the past two years. For 2018, its earnings estimates have been marginally revised upward over the past 60 days.
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