JACKSON – Trustmark Corp. believes its attempt to acquire Cadence Bank – even though it failed – can serve as a blueprint for other banks seeking to buy distressed institutions not yet under Federal Deposit Insurance Corporation control.
On Oct. 6, Cadence Financial Corp., the parent of Cadence Bank, called off an acquisition deal with Trustmark and accepted what it called a more lucrative buyout from a Houston, Texas, company formed to invest in community banks.
Starkville, Miss.-based Cadence said Community Bancorp LLC will buy the company for $2.50 per share in cash, a total of about $30 million.
On Sept. 22, Trustmark offered a stock exchange valued at $23.6 million, or about $2 per share.
Cadence also said Community Bancorp has offered to buy $44 million in preferred stock issued to the U.S. Treasury for $38 million in cash. The stock was issued to the government for the bank bailout program. Trustmark had offered $30 million, plus accrued and unpaid dividends, to buy back the shares.
Jerry Host, Trustmark president and COO, told the Mississippi Business Journal that Trustmark”s effort represents a primer on how to buy a “live” troubled bank.
“We believe the transaction will be studied carefully by the industry and there will be other live acquisitions announced in the future,” said Host, who takes over as Trustmark”s chairman and CEO in January.
Trustmark pocketed a $2 million penalty from Cadence but it”s not yet known whether that will cover costs it incurred, said Trustmark senior vice president Melanie Morgan.
“We”re still in the process of assimilating that” in order to report it to shareholders, Morgan said.
In a proxy statement filed Wednesday with the Security Exchange Commission, Cadence said its acceptance – then rejection – of Trustmark”s office happened during a whirlwind process that initially began in late July and involved a round of back-and-forth offers.
Unable to raise $80 million of capital through a public offering, Cadence said it began looking for private investors and found eight interested parties by August. It also looked for financial institutions that also might be interested in acquiring the company. Among them was Trustmark.
Both CBC and Trustmark reviewed Cadence”s operations, and from then on, negotiations ramped up.
Cadence and Trustmark had an initial agreement of $3 per share, but Trustmark”s offer dropped to $2 per share after the Jackson bank negotiated the TARP payback with the government, Cadence said in the statement.
Cadence said despite the announced Trustmark acquisition deal, CBC continued telling Cadence it was interested. A week later, Cadence”s board met and agreed to CBC”s offer, notifying Trustmark on Sept. 30.
Trustmark told Cadence it expected it to abide by its agreement. However, on Oct. 5, Trustmark sweetened the deal, making a “best and final offer” of $2.25 a share, but Cadence”s board considered CBC”s the superior offer and notified Trustmark the next day.
And on Oct. 6, Cadence announced it had agreed to a new agreement with CBC.
That deal must still be approved by shareholders and it also must meet regulatory approval. No date has been set for a stockholders” vote.
Cadence officials said in the proxy statement that they hope to close the deal by March 31.
If completed, Cadence said it will become a privately held company and operate as a subsidiary of CBC.
The merger can be terminated at any time by either party. Under certain conditions, Cadence would have to pay as much as $4.5 million in termination fees, according to the proxy statement.
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