Town and Country Financial in Springfield, Ill., initially tried to sell itself to HBT Financial in Bloomington, Ill., more than two years prior to announcing a deal.
The $4.2 billion-asset HBT agreed in August to buy the $876 million-asset Town and Country for $101.4 million.
The banks discussed a merger in December 2019 when they entered into a nondisclosure agreement, according to a regulatory filing associated with the pending combination. Fred Drake, HBT’s chairman and CEO, met with Micah Bartlett, Town and Country’s president and CEO, the next month.
HBT, after those initial talks, indicated that it planned “to pursue other opportunities,” the filing said.
Bartlett, in January 2022, met with the CEO of an unnamed publicly traded bank. Two months later, Lance Carter, HBT’s president and chief operating officer, indicated to Bartlett that the bank was again interested while expressing “general pricing guidelines” for a deal.
Town and Country and the unnamed bank entered into a nonbinding indication of interest on March 3 where the suitor proposed a cash-and-stock deal valued at $36.75 a share. On April 29, the unnamed bank lowered the value of its proposal and the two sides terminated discussions.
Town and Country asked its investment bank to contact HBT, with “responded favorably” to the outreach. The banks entered into a new non-disclosure agreement on May 9.
In subsequent days, the banks held “numerous” conference calls to discuss due diligence and related questions. Town and Country forecast having $904 million of assets and $637 million of loans at the end of 2022, along with full-year net income of about $11.2 million.
HBT sent its preliminary pricing guidelines to Town and Country on May 16. Four days later, HBT proposed an evenly split cash-and-stock transaction valued at $95 million. The offer “exceeded the implied value of the consideration” originally proposed by the other, unnamed bank.
The banks would soon agree to exclusive negotiations.
An initial draft of the merger agreement was sent to Town and Country on July 11. The parties extended the exclusivity period twice as negotiations continued.
The implied value was $101.4 million, or $35.66 a share, by Aug. 22, when Town and Country’s board approved the merger. The deal was announced the following day.
The deal, which is expected to close in the first quarter, priced Town and Country at 139% of its tangible book value.
HBT expects the deal to be 17% accretive to its 2023 earnings per share, excluding merger expenses. It should take HBT two years to earn back an estimated 4.7% dilution to its tangible book value.
HBT plans to cut about 28.5% of Town and Country’s annual noninterest expenses. HBT expects to incur roughly $13.5 million of merger-related expenses.
Town and Country “is a highly compatible franchise that we have respected and admired for a long time,” Drake said in a press release announcing the deal.