The Bank Slate


How Independent Bank in Texas Went from Buyer to Seller

Merger talks between SouthState in Winter Haven, Fla., and Independent Bank Group in McKinney, Texas, were briefly halted in February to allow South State to respond to a cybersecurity incident.

The $46 billion-asset SouthState agreed on May 17 to buy the $18.9 billion-asset Independent for $2 billion in one of the biggest bank deals announced in 2024.

Discussions between the banks began informally in 2019, according to a regulatory filing tied to the pending merger. The filing also disclosed that David Brooks, Independent’s chairman and CEO, is set to receive nearly $18 million in compensation associated with the deal.

Brooks and John Corbett, SouthState’s CEO, during meetings in the second quarter of 2019 and October 2022, informally discussed the possibility of a merger, though no actionable proposals or specific terms were discussed, the filing said.

On Dec. 1, the CEOs again discussed exploring the possibility of a merger. A few weeks later, Independent’s board authorized Brooks to keep the discussions going.

The companies signed a confidentiality agreement on Jan. 2, and Independent began sharing limited nonpublic financial information, including details about deposits, capital and loans. From Jan. 24 to Feb. 12, the companies had preliminary talks about personnel matters, cultural and strategic fit, complementary branch footprints, and positioning in terms of technology and systems.

A Brief Pause

SouthState disclosed on Feb. 9 that it suffered a breach three days earlier, adding that it had “initiated its incident response and business continuity protocols and began taking measures to disrupt the unauthorized activity.” The bank, as a result, “proactively took measures to isolate parts of its network.”

Merger discussions were suspended on Feb. 12 to SouthState to “devote its attention to the response to and forensics around” the incident, the merger-related filing said. SouthState, in the filing, said the pause was also due to the regulatory and interest rate environment.

SouthState and Independent resumed talks in mid-March (SouthState would announce in April that the situation with the cyberattack had been contained). Independent began supplying updated due diligence information and talks started to cover potential transaction terms, including exchange ratios.

Corbett and Brooks, during a March 22 meeting, negotiated a 0.625 exchange, which valued Independent at roughly $2.16 billion based on Independent’s outstanding shares and SouthState’s stock price. They also discussed post-closing board composition and director noncompete agreements.

A day later, those terms were included in a letter of interest, along with a request for a 45-day exclusivity period. A letter of intent was signed at the end of March.

An Alteration Made

The first draft of the merger agreement was shared on April 12; SouthState conducted financial due diligence between April 19 and April 23.

During a May 2 conversation, Corbett told Brooks that he could no longer recommend the 0.625 exchange ratio to his board, citing Independent’s first-quarter performance, changes in the interest rate environment and updated analyst earnings estimates for each company.

SouthState lowered its exchange ratio to a range of 0.58-0.59 “in light of the changes to the model stemming from the information recently made available to SouthState,” the filing said. Independent countered with an 0.6 ratio – contingent on a deal being announced on May 13.

The companies again paused talks on May 5 to consider the new exchange ratio and announcement timing. SouthState agreed two weeks later to the 0.6 ratio, which had an implied value of about $2 billion.

Each board unanimously voted for the deal during separate May 17 meetings. It was announced on May 20.

Reviewing the Terms

The deal, which is expected to close in the first quarter, priced Independent at 148% of its tangible book value.

“With a local, geographic management model, an industry-leading track record on credit and a presence in some of the best markets in the country, Independent … is a great fit with SouthState,” Corbett said in a press release announcing the deal.

Brooks and two other directors will join SouthState’s board. 

The deal is expected to be 27.3% accretive to SouthState’s 2025 earnings per share. It should take two years to earn back an estimated 9.6% dilution to SouthState’s tangible book value.

SouthState aims to cut about a quarter of Indpendent’s annual noninterest expense and incur $175 million of pretax merger expenses.

The latest filing disclosed that Brooks, who is expected to serve on SouthState’s board until April 2027, will receive a $12.8 million lump sum payment to address his change-in-control agreement at Independent. He will also receive a $5 million cash bonus this year for his “contributions to IBTX in connection with the merger.”

Daniel Brooks, Independent’s vice chairman and David Brooks’ brother, will receive a $4 million payment to address his change-in-control agreement. He will be paid a $540,000 annual salary (to adjust to $556,000 next year) and a $1.1 million bonus for 2025 to join SouthState as an executive vice president and executive adviser to Corbett.

David Brooks and Daniel Brooks agreed to a two-year noncompete agreement and a one-year nonsolicitation agreement, along with perpetual confidentiality and nondisparagement covenants.

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