The wave of regional bank consolidation continued recently with the announcement that BancorpSouth (NYSE: BXS) and Cadence Bancorporation (NYSE: CADE) plan to join hands in a merger of equals. The deal will create a $44-billion-asset bank in the South with a presence in Texas, Georgia, Mississippi, and Alabama. Cadence had been rumored to be contemplating a sale, but the merger of equals component creates an interesting dynamic, and the market so far has not exactly taken to the deal. Let's see what the merger means for shareholders and if it will work out long-term.
Unlike a typical sale, a merger of equals means that Cadence is not just getting bought out, but that it will essentially play a big role in the bank moving forward, which complicates things. For instance, BancorpSouth is technically the buyer in the all-stock deal, and will exchange 0.7 shares for each Cadence share. But then Cadence, which is flush with excess capital, will also pay its shareholders a special dividend of $1.25 per share. In total, the deal is valued at $23.83 per Cadence share, or roughly $3 billion.
Even though BancorpSouth is technically the surviving entity, the combined bank will continue under the Cadence Bank brand, although Cadence plans to rebrand to "honor the history of both brands." Additionally, the board of directors will grow to a whopping 20 people, with 11 board members from BancorpSouth and nine members from Cadence. Ultimately, management expects to reduce the size of the large board eventually.
For further details see:
Will the BancorpSouth-Cadence Merger of Equals Work Out for Shareholders?