Partners Bancorp in Salisbury, Md., was allowed to look for a buyer after OceanFirst Financial, its original acquirer, agreed to a limited waiver of their exclusivity agreement.
OceanFirst’s planned purchase of the $1.6 billion-asset Partners fell through last fall when they were unable to secure regulatory approval. Partners would agree in February to sell to the $1.2 billion-asset LINKBANCORP in Camp Hill, Pa., for $167.8 million.
Partners’ began the sales process in late August 2021 by having its investment bank run a “market check” by contacting 31 potential buyers, according to a regulatory filing tied to the pending sale to LINK. Fourteen signed nondisclosure agreements and three, including OceanFirst, sent proposed offers.
Partners and OceanFirst agreed in November 2021 to a merger valued at $186 million.
As time wore on without regulatory approval, Partners began to have concerns that the deal wouldn’t close. Various third parties began expressing an interest in Partners last summer, but an exclusivity agreement barred management from engaging in conversations.
OceanFirst agreed to grant Partners access to “a limited number of third parties,” starting on Oct. 1, to gauge their interest in a deal.
LINK had been preoccupied with its own acquisition – GNB Financial Services – and its September initial public offering.
Partners investment bank contacting a handful of banks in October, and the company eventually executed a nondisclosure agreement with one potential counterparty. Partners met with another bank but it was already pursuing another deal.
OceanFirst and Partners terminated their planned merger on Nov. 9.
Ken Lehman, a big investor in Partners and a director, met with Andrew Samuel, LINK’s CEO, on Nov. 11, where a potential merger was discussed. The meeting did not involve a proposal or discussion of any terms.
Partners’ investment bank ran another “market check” between November and January, contacting 35 potential buyers. Seven executed nondisclosure agreements and two, including LINK, submitted offers.
An unnamed bank proposed an all-stock transaction that valued Partners at $6.18 to $6.65 a share – or $8.90 to $12.55 a share if certain financial projections and trading multiples were achieved.
LINK’s proposal was an all-stock deal that valued Partners at $10.43 a share. The proposal also offered to have all of Partners’ directors join LINK’s board.
At a Jan. 10 meeting, Partners board decided against a deal with the unnamed bank. Instead, it asked LINK to increase its exchange ratio. LINK would increase the ratio, raising the deal’s value to $10.70 a share.
LINK and Partners entered into an exclusivity agreement and a new mutual confidentiality agreement. The first draft of the merger agreement was circulated on Jan. 24.
LINK’s board in February approved a plan to raise $10 million through a private placement of common stock to help fund the proposed acquisition.
Partners also pressed LINK to again increase the exchange ratio, reflecting its due diligence and market conditions at the time. The ratio was adjusted again but, due to market prices, the new terms valued Partners at $9.14 a share.
On Feb. 21, LINK entered into investment agreements with certain directors and other accredited investors to sell about 1.3 million shares of common stock at $7.80 a share.
Each company’s board approved the deal at separate Feb. 22 meetings. The acquisition, announced later that day, is expected to close in the third quarter.
Partners shareholders will own 56% of the shares in the combined company, which will operate at LINK. Camp Hill will serve as the corporate headquarters, while the company will keep a “major operating presence” in Salisbury and Frederick, Va.
Partners’ executives will lead the Delmarva/Maryland, northern Virginia and Fredericksburg regions for LINK. Jeffery Turner, Partner’s chairman, will serve as vice chairman. Turner will succeed Michetti as chairman in September 2024.
Samuel will remain CEO of the company after the deal closes. John Breda, Partners’ president and CEO, will become CEO of the Delmarva market.
The deal is expected to be 23% accretive to LINK’s 2024 earnings per share. It should take less than three years for LINK to earn back any dilution to its tangible book value.
LINK plans to cut about 18% of the combined company’s expenses, or roughly $13.8 million. About $5 million to $6 million of the savings will come from merging Partners’ banks. The companies expect to incur about $22.8 million of merger-related expenses.