The Bank Slate


A look at Atlantic Union’s whirlwind courtship of American National

Atlantic Union Bankshares in Richmond, Va., acted quickly to seal a deal to buy American National Bankshares in Danville, Va..

The $20.6 billion-asset Atlantic Union agreed on July 24 to buy the $3.1 billion-asset American National for $416.8 million.

Talks began just three months earlier when John Asbury, Atlantic Union’s president and CEO, met with Jeffrey Haley, his counterpart at American National, according to a regulatory filing tied to the pending merger.

During the April 7 meeting, the executives discussed the state of banking and each company’s opportunities and challenges. Asbury told Haley that Atlantic Union wanted to continue its strategy of pursuing acquisitions and was looking for attractive targets like American National. No specific terms were discussed.

Haley contacted Asbury in late April to suggest a peer-to-peer meeting between the management of the organizations. During that April 29 meeting, Atlantic Union representatives expressed potential interest in a merger.

Atlantic Union sent its preliminary pricing on May 12, proposing an all-stock deal with a proposed fixed exchange ratio of 1.25 to 1.3 a share.

At a May 30 meeting, American National’s capital management committee discussed exploring a potential sale due to the challenges faced by the bank and the “substantial operational transformation that would be required for top-quartile peer performance, the filing said.

On June 2, Atlantic Union’s executive committee authorized management to negotiate, execute and deliver a nonbinding indication of interest with a fixed exchange ratio not to exceed 1.35 a share. A few days later, Haley directed American National’s investment bank to request increasing the exchange ratio of 1.35 a share.

Atlantic Union and American National signed a mutual confidentiality agreement on June 8 and began to exchange confidential information. From June 8 to July 24, the parties communicated by phone and other means to review business, financial and other information.

On June 12, Atlantic Union submitted a nonbinding indication of interest with an all-stock deal with a proposed exchange ratio of 1.35 a share, or roughly $414 million, and a 60-day exclusivity clause. The letter proposed appointing two American National directors to the Atlantic Union board.

American National’s capital management committee concluded on June 14 that the exchange ratio was attractive and that moving forward was in the best interest of shareholders. Atlantic Union agreed to make minor modifications tied to severance payments and a shorter exclusivity period.

The first draft of the merger agreement was shared on July 7. The companies’ boards unanimously approved the agreement on July 24; an announcement was made the next day. The deal, expected to close in the first quarter, valued American National at 174% of its tangible book value.

“This is a company and leadership team we have long admired and know well, and the relationship between our two banks spans decades,” Asbury said in a press release announcing the deal. “We expect that our combined footprint will bring additional convenience to our customers and position us as an even stronger competitor against the large national, super-regional and smaller community banks.”

Atlantic Union expects the deal to be 19% accretive to its earnings per share. It should take three years to earn back an estimated 9.7% dilution to the company’s tangible book value.

Atlantic Union plans to cut about 40% of American National’s annual noninterest expenses. It expects to incur $32 million in merger-related expenses.

Two American National directors, Nancy Howell Agee and Joel Shepherd, will join Atlantic Union’s board. Jeff Haley, American National’s chairman, president and CEO, will assist with the integration and advise on the legacy American National markets.

Atlantic Union entered into a two-year consulting agreement with Haley where he will be eligible for a $2 million lump-sum cash payment. Haley will be subject to two-year non-competition and non-solicitation covenants that will apply across Atlantic Union’s footprint.

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