Two credit unions bid to buy the banking unit of Citizens Bancshares, but tax considerations and potential challenges in securing regulatory approval led the Kansas City, Mo., company to negotiate with Southern Missouri Bancorp in Poplar Bluff.
The $3.2 billion-asset Southern Missouri agreed on Sept. 20 to buy the $1 billion-asset Citizens for $140 million.
Citizens initially tried to find a buyer in the fall of 2020, according to a regulatory filing tied to the proposed sale to Southern Missouri. Citizens ended the process in March 2021.
Citizens revisited a sale in January 2022, and its investment bank contacted more than 60 potential buyers. Seventeen signed nondisclosure agreements and received confidential information.
Five bidders – including two credit unions – submitted offers between late April and early May. While each was asked to increase and finalize their bids, none of them did so. Citizens’ strategic committee and some other directors met with the bidders between May 20 and May 26.
The two credit unions submitted cash bids for Citizens’ bank that “offered more consideration” Southern Missouri’s offer, the filing said. The board was worried that “there would be adverse tax consequences to Citizens’ shareholders and there were significant regulatory constraints in Missouri that would apply to any proposed sale of the bank to a credit union.”
Citizens decided on June 6 to negotiate exclusively with Southern Missouri. Several versions of the merger agreement were circulated between July 11 and Sept. 19. The exclusivity agreement was extended twice – on July 29 and Aug. 30.
Citizens’ board unanimously approved the merger agreement on Sept. 19. Southern Missouri’s board approved the transaction a day later and the deal was announced.
The deal, which is expected to close in the first quarter, priced Citizens at 150% of its tangible book value.
“Citizens’ franchise covers excellent communities, including the Kansas City metropolitan area,” Greg Steffens, Southern Missouri’s chairman and CEO, said in a release announcing the deal.
Citizens has “developed a strong deposit base and have a long history of serving their customers, which will be a great addition to our continued growth,” Steffens added. “A presence in Kansas City helps transform Southern Missouri into a more significant statewide player in Missouri as we continue to build long-term shareholder value.”
Southern Missouri plans to cut about 35% of Citizens’ annual noninterest expenses. The company expects to incur $8.6 million of merger-related expenses.