Kearny Financial Corp. and MSB Financial Corp.’s previously announced merger agreement is expected to be completed on Jul 10, after market close. In December 2019, Kearny Financial announced that it would acquire MSB Financial for approximately $94 million. In May 2020, the companies received all the shareholder and regulatory approvals or waivers that were necessary to complete the merger. Terms of the Deal At the time of announcement of the deal, it was decided that MSB Financial shareholders could elect to receive either 1.3 shares of Kearny Financial’s common stock, $18.00 in cash or a combination of cash and shares for each of their shares. This was subject to proration to ensure that 90% of MSB Financial’s shares would be exchanged for shares of Kearny Financial and the remaining 10% would be exchanged for cash as required by the agreement. Also, per the terms of the deal, Kearny Financial’s shareholders will own 94% of the combined company and MSB Financial’s shareholders will own 6% post the closure. However, according to the election results (the election period ended on Jun 15), cash elections were oversubscribed. Hence, now shareholders of MSB Financial will receive the merger consideration in the following three ways. First, shareholders who have made a valid all-stock election will be entitled to receive 1.3 shares of Kearny Financial’s common stock for each of their shares plus cash in lieu of a fractional share, without interest. Second, shareholders, who have made a valid all-cash election or a valid mixed stock and cash election, will be entitled to receive $18.00 in cash, without interest, for 12.3% of their shares for which they made a valid cash election and 1.3 shares of Kearny Financial’s common stock for each of their remaining shares of MSB Financial common stock plus cash in lieu of a fractional share, without interest. Third, shareholders who have made no election or an invalid election are entitled to receive 1.3 shares of Kearny Financial’s common stock for each of their shares plus cash in lieu of a fractional share, without interest. Financial Impact At the time of deal announcement, it was projected that the transaction would be immediately accretive to Kearny Financial’s earnings per share by approximately 11% on a pro forma basis. Also, the deal is expected to result in fully phased in non-interest expense cost savings. It was also projected that the transaction would be dilutive to tangible book value by approximately 1.6%, with an earn-back period of 2.8 years under both the crossover and earnings accretion methods. Notably, the acquisition will help Kearny Financial in expanding its branch footprint further westward into Somerset and Morris Counties. Over the past year, shares of Kearny Financial have lost 41.4% compared with the industry’s decline of 29.8%.
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