Patriot National Bancorp in Stamford, Conn., has agreed to buy American Challenger Development in a move designed to create the nation’s biggest challenger bank.
The $952 million-asset Patriot National said in a press release Monday it will pay $119 million for American Challenger. The deal will be structured as a reverse subsidiary merger, with American Challenger surviving as a wholly owned subsidiary of Patriot.
Raymond Quinlan, American Challenger’s CEO, will become Patriot’s CEO. Felix Scherzer, American Challenger’s chairman and president, will have the same titles at Patriot.
Michael Carrazza, Patriot’s chairman, will become vice chairman.
Patriot also entered into separate agreements to securities to certain investors to bring in $540 million of capital. The company plans to raise another $350 million. The investors will own nearly 72% of Patriot following the recapitalization.
The acquisition and the capital raises are expected to close in the first quarter.
Patriot plans to operate two divisions – the Patriot Bank division will maintain the company’s existing business, while the American Challenger division will execute the high-growth business plan.
“We’re excited to have engineered this industry-disrupting merger,” Carrazza said in the release.
“Customers will benefit from an expanded array of services and a tech-savvy banking experience, while shareholders should benefit from the compelling value that will be created,” Carrazza added. “Patriot’s team will remain intact and will be complemented by American Challenger’s team and digital platform capabilities.”
American Challenger’s organizers had pursued a charter with the Office of Comptroller of the Currency, along with deposit insurance from the Federal Deposit Insurance Corp., in late 2020. The plan was to target Gen X customers with products such as deposits, mortgages and senior-secured commercial loans.
The bank would have been initially capitalized with $750 million with plans to raise another $230 million from selling preferred stock. It had gained conditional OCC approval.
American Challenger also announced on Monday that it had entered into a term sheet with Sunlight Financial to buy nearly $1.8 billion of solar energy loans over several years.
BofA Securities, Barclays Capital and Keefe, Bruyette & Woods are serving as private placement agents for Patriot’s recapitalization. Squire Patton Boggs advised the placement agents.
Evercore and Blank Rome advised Patriot on the transaction. Sullivan & Cromwell advised American Challenger.