The Bank Slate


Oakwood in Texas Nixed 11th-hour Offer to Finalize Sale to Business First

An eleventh-hour offer by an unnamed bank failed to sway the board of Oakwood Bancshares in Oakwood, Texas, from agreeing to sell to Business First Bancshares in Baton Rouge, La.

The privately held bank sent an offer to the $843 million-asset Oakwood two days before its exclusivity period with the $6.7 billion-asset Business First was set to expire. Uncertainty over the last-minute proposal led the board to stay the course with Business First, according to a regulatory filing tied to their pending merger.

Business First agreed on April 25 to buy Oakwood for $85.7 million.

Oakwood had found a buyer once before.

In January 2022, Oakwood agreed to sell to Maple Financial Holdings, the parent of MapleMark Bank, for $9 a share in cash. The banks terminated their agreement in September 2022 after determining that it was unlikely that Maple “would receive the required regulatory approvals.”

Oakwood’s board invited an investment bank to “introduce interested, prospective purchasers to Oakwood senior management,” the filing said. Executives at Oakwood and Business First, including President and CEO Jude Melville, met in Dallas on April 20, 2023, where they “discussed future plans and their respective general business combination philosophies.

Another meeting took place on July 13 where Business First discussed its business, past acquisitions, and growth plans. They also discussed Oakwood’s merger considerations, management team, and “the overall value of Oakwood to Business First in Texas.” The parties entered into a confidentiality agreement on July 18.

Oakwood’s management team met with another, unnamed bank in early September to discuss “potential synergies.”

Business First submitted its initial offer on Oct. 9, which outlined a proposed transaction structure, including an offer, ownership split, and exchange ratio. The details were not disclosed in the filing.

Oakwood’s board met with Melville on Nov. 6 and representatives of the other suitor two days later.

The other company sent a proposal on Nov. 13 that “described the material financial components of a proposed all-stock transaction and included certain modeling assumptions and pro forma ownership assumptions.” No other details were shared in the filing.

Business First sent a nonbinding letter of intent on Nov. 21 with an all-stock offer with a 0.5112 exchange ratio and a 90-day exclusivity period. Oakwood’s board decided at a Dec. 1 meeting to continue talks with Business First and to end discussions with the other bank.

The letter of intent was executed on Dec. 15 and due diligence took place from mid-December to late April 2024.

Oakwood and Business First also discussed potential litigation for Oakwood tied to a former customer. They agreed to put $1.5 million into escrow to reimburse Business First if it incurred litigation-related losses and expenses.

The exclusivity period was extended to April 25. An initial draft of the merger agreement was sent on April 4, though the filing gave no details.

Another unnamed bank contacted Oakwood on April 23 to express interest in a cash deal with an aggregate amount equal to 1.55 times Oakwood’s consolidated tangible equity on the last day of the quarter preceding the closing date – minus Oakwood’s merger costs. There were other conditions tied to Oakwood’s tangible leverage capital ratio at closing and the potential buyer’s need to obtain financing.

The privately held bank was smaller than Oakwood based on asset size.

Oakwood’s directors reviewed with the bank’s lawyers several issues with the other bank’s proposal. It had not conducted due diligence, would need to raise capital, and “would need to demonstrate to regulators that it was prepared to exceed $1 billion in assets,” the filing said.

As a result, the board approved the merger agreement with Business First on April 24. The board at Business First signed off on the acquisition the following day, and it was announced. The deal, which is expected to close in the fourth quarter, priced Oakwood at 106% of its tangible book value.

The percentage of Texas loans on Business First’s balance sheet will rise from 37.1% to 44.4%; the percentage of Texas deposits will go from 19.3% to 30.6%. 

“Expansion in the Dallas market has been a successful focus of b1BANK for a number of years,” Melville said in a press release announcing the acquisition. “We believe the proposed transaction with Oakwood is an effective and efficient way to deepen our customer, employee, and shareholder bases in what is arguably one of America’s strongest markets.”

Roy Salley, Oakwood’s CEO, will join Business First as regional chairman of Dallas. He is expected to receive about $2.3 million of compensation at closing due to his existing employment agreement with Oakwood – assuming the deal closes by Oct. 31.

William Hall, Oakwood’s chairman, will join Business First’s board.

Business First expects low-double-digit earnings per share accretion. It should take about two years to earn back any dilution to Business First’s tangible book value.

Business First plans to cut about 38% of Oakwood’s annual noninterest expense, or roughly $9.3 million. It expects to incur $14 million of pretax merger-related expenses.

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