The Bank Slate

INSIGHTS INTO THE BANKING INDUSTRY

Four suitors pursued GrandSouth in South Carolina

GrandSouth Bancorp. in Greenville, S.C., considered four bids before deciding to negotiate with First Bancorp in Southern Pines, N.C. 


The $10.6 billion-asset First Bancorp agreed to buy the $1.3 billion-asset GrandSouth in June for $181 million of stock. 

GrandSouth’s investment bank contacted 11 potential acquirers in March with the candidates selected because of “their size, capacity to pay and strategic interest in GrandSouth or banks in the South Carolina marketplace,” according to a regulatory filing tied to the pending merger. 

Six of the parties signed nondisclosure agreements to receive confidential information. GrandSouth’s management met with five of them, and four submitted offers on March 31. 

First Bancorp had the highest initial offer, suggesting an all-stock transaction that valued GrandSouth at $38 a share. First Bancorp proposed appointing two GrandSouth directors to its board. 

The next-highest offer valued GrandSouth at $35.69 a share with 70% of the consideration involving stock. The offer proposed putting a GrandSouth director on the suitor’s board while creating a South Carolina advisory board. 

Another institution pitched an all-stock transaction valued at $34.62 a share, adding a GrandSouth director to the combined company’s board and the creation of an advisory board. The fourth bid involved stock and an implied consideration of $31.91 to $35.46 a share. 

The top three bidders were asked to submit new offers, which they did on May 4. 

Based on a 90-day average, First Bancorp had the best offer with a valuation of $39.39 a share. The other proposals valued GrandSouth at $37.28 and $37.82, respectively. 

GrandSouth’s board decided on May 18 to negotiate with First Bancorp. The first draft of the merger agreement was shared less than a week later. The terms of the agreement were largely finalized by June 18. 

The boards of both companies unanimously approved the merger on June 20. 

The deal, which is expected to close late this year or in early 2023, was announced the following day. The transaction priced GrandSouth at 180% of its tangible book value. 

“GrandSouth is in great communities with talented bankers,” Mike Mayer, First Bancorp’s president, said in a press release announcing the deal. “Our cultures are very similar and we are excited to bring our teams together.”

First Bancorp expects to incur $15 million of merger-related charges. It plans to cut about 30% of GrandSouth’s annual noninterest expenses. 

The deal is expected to include high-single-digit accretion to First Bancorp’s earnings per share once fully phased in. It should take about three years for First Bancorp to earn back any dilution to its tangible book value. 

James Schwiers, GrandSouth’s president, will become president of South Carolina banking at First Bancorp.

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