The Bank Slate

INSIGHTS INTO THE BANKING INDUSTRY

William Penn in Pennsylvania received five offers as it looked for buyer

William Penn Bancorp. in Bristol, Pa., received offers from five potential suitors before agreeing to sell to Mid Penn Bancorp in Harrisburg, Pa.

The $5 billion-asset Mid Penn agreed last fall to buy the $812 million-asset William Penn for $127 million in stock in a deal expected to close in the first half of this year. Mid Penn decided to raise $75 million in conjunction with the acquisition.

William Penn’s board decided in March to explore selling and talking to an unnamed bank that had expressed an interest in a deal, according to a regulatory filing tied to the pending merger. In June, the bank’s CEO indicated that it could pay $9 a share in stock for William Penn, an offer that the board considered “was inadequate and not in the best interests of shareholders.”

Talks with that bank ended.

More Offers Come In

William Penn sought more offers over the summer. By late August, the board had four more indications of interest to consider, each with all-stock considerations.

  • Mid Penn: A fixed exchange ratio of 0.426 shares for each William Penn share, resulting in an implied transaction value of $11.87 a share.

  • Company B: An implied transaction value of $12.80 a share.

  • Company D: An implied transaction value of $11.24 a share. The company ended talks shortly after it sent its offer.

  • Company E: An implied transaction value of $10.43 a share. The board decided the offer was too low.

Despite the higher implied value of company B’s offer, William Penn’s board determined that the bidder’s stock valuation was “disproportionately high relative to peers” and would deliver less upside. That company’s relatively illiquid stock, new management team with limited M&A experience, and the face that William Penn would be a new market for the suitor were also concerns.

Ultimately, William Penn decided to engaged in exclusive negotiations with Mid Penn.

Final Agreement and Financial Impact

The merger was approved by both board on Oct. 31 and announced the next day. Under the terms of the deal:

  • William Penn shareholders will receive 0.426 shares of Mid Penn stock for each William Penn share.

  • The implied value of the transaction at the time of agreement was $11.87 a share.

  • The transaction is expected to enhance capital ratios, improve commercial real estate concentration, and create further growth opportunities for the combined entity.

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