Byline Bancorp in Chicago briefly walked away from talks to buy Inland Bancorp in Oak Brook, Ill.
The $7.4 billion-asset Byline agreed in late November to buy the $1.2 million-asset Inland for $165 million in cash and stock. Initial talks between the companies ended last May before being resurrected three months later, according to a regulatory filing tied to the pending deal.
Inland’s investment bank reached out to a variety of potential buyers in the Midwest in January 2022. Six financial institutions, including Byline, entered into confidentiality agreements to conduct due diligence.
Inland’s board determined in late February that Byline’s indication of interest “provided the highest potential long-term value to Inland’s stockholders” and “ongoing continuity of a high level of service” for customers.
Byline and Inland agreed to a 60-day exclusivity period. Byline’s initial proposal had an implied value of $5.50 to $6 a share, with 80% of the consideration comprised of stock.
Byline indicated in early May that Inland would need to sell or shut down its mortgage business. Despite serious talks with a potential buyer, Inland failed to secure a deal and chose to shutter Inland Home Mortgage regardless of whether it sold to Byline.
Byline informed Island on May 18 that it was no longer interested in pursuing a deal. Byline’s board “wanted to evaluate the overall economic situation, including the interest rate environment and the impact of a possible recession, before committing to … a transaction,” the filing said.
Island revisited discussions with several other potential buyers, including Midwestern credit unions. Inland entered into a confidentiality agreement with a financial institution, but the potential suitor did not present an indication of interest that Inland felt was favorable to its shareholders.
Byline returned to the table in August and the parties entered into a new exclusivity agreement. An initial draft of the merger agreement was shared on Aug. 24.
The exclusivity agreement was extended on Oct. 27 to last until Nov. 11.
Each company’s board approved the deal in late November; it was officially announced on Nov. 30.
The deal, which is expected to close in the second quarter, valued Inland at 125% of its tangible book value.
Inland “is a well-established and trusted financial institution with deep client and community relationships, which we look forward to continuing,” Roberto Herencia, Byline’s executive chairman and CEO, said in a press release announcing the deal. “Joining forces with Inland … brings to all of our customers an expanded footprint across Chicago.”
Byline plans to cut about 30% of Inland’s annual noninterest expenses. It expects to incur $18.6 million of merger-related expenses.
Byline said the deal should be 8.1% accretive to its 2023 earnings per share and 10.7% accretive the next year. It should take less than three years for Byline to earn back any dilution to its tangible book value.
One Inland director will join Byline’s board.
Daniel Goodwin, Inland’s chairman and CEO, owns about 74.1% of the company’s outstanding common stock, the latest filing said. He entered into a voting agreement to support the sale.
Peter Stickler, Inland’s president, entered into an employment agreement with Inland that will pay him about $2.1 million when the deal closes.