In a turn of events that shocked the local banking community this morning, Cadence Financial Corp. announced that it was dumping its previous buyout offer from Jackson-based Trustmark and agreed to be acquired by Community Bancorp LLC, a Houston-based company formed to invest in community banks.
Cadence will continue to operate under its charter and name, and the deal would mean a greater payout for shareholders. The deal would also mean jobs lost in the Trustmark merger would remain with the new Cadence.
Sources with Cadence said that employees were elated by the news.
CBC agreed to create a new subsidiary, with Cadence as the surviving corporation.
“We are delighted to have reached agreement on our transaction with Cadence,” said Paul B. Murphy Jr., CEO and president of CBC. “Cadence has a talented management team, highly-dedicated employees and a loyal customer base. We believe we can support Cadence with expanded access to capital to fund Cadence”s future growth, including loans to local businesses and individuals.”
Under the agreement, Cadence shareholders would receive $2.50 in cash for each Cadence common share. CBC has offered to purchase the $44 million of Cadence preferred stock issued to the U.S. Department of the Treasury under the Troubled Asset Relief Program, or TARP, for $38 million in cash.
“Treasury has indicated its willingness to agree to sell its Cadence preferred stock and warrant for such cash consideration subject to the entry into definitive documentation acceptable to Treasury in its sole discretion,” CBC said in a release.
Trustmark had agreed to exchange $23.6 million in stock for Cadence stock, or about $2 per share, in a tax-free deal. Trustmark also offered to pay $30 million in cash, plus accrued and unpaid dividends, for Cadence preferred shares issued to the Treasury.
CBC sees potential to expanding Cadence into new markets.
“I am pleased to announce this transaction with CBC will deliver more value to our shareholders,” said Lewis F. Mallory Jr., chairman and CEO of Cadence. “The cash price per share represents a premium to our current trading price and represents a higher, more certain price than what had been previously offered.”
The transaction is expected to close by the first quarter of 2011.
Cadence, a $1.9 billion bank, has branches in Mississippi, Tennessee, Alabama, Florida and Georgia. Cadence”s stock is listed on the Nasdaq under the symbol CADE.
Houston-based Community Bancorp has raised equity capital commitments in excess of $900 million for the purpose of buying U.S. banks “with a particular focus on community banks that are well positioned to benefit from the equity capital and industry expertise CBC can provide,” the release said.
CBC”s management has deep roots in banking. Murphy was previously CEO of Amegy Bank of Texas, an $11 billion bank headquartered in Houston. He is a director of the Mississippi State University Foundation, Federal Reserve Bank of Dallas, Houston branch, and Hines Real Estate Investment Trust.
CBC”s chairman, William B. Harrison Jr., is the former chairman and chief executive officer of JPMorgan Chase, where he retired as chairman in 2006. Previously he was chief executive officer of Chase Manhattan Corp., and presided over the mergers with J.P. Morgan in 2000 and Bank One in 2004.
Trustmark had said it had decided to buy Cadence because it already had written off tens of millions of bad loans and the company fit Trustmark”s profile for acquisition targets. Trustmark officials couldn”t be reached for comment this morning.
Starkville-based Cadence missed a September deadline to raise capital set by the federal Office of the Comptroller that could have led to a federal takeover of the bank.
Trustmark shares dropped on the news. At midday, shares were trading at $21.75, down 58 cents. Cadence was up sharply, trading at $2.46 a share, up 38 cents from Tuesday.
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