Prosperity Bancshares in Houston has agreed to buy Stellar Bancorp in Houston.
The $38.5 billion-asset Prosperity said in a press release that it will pay $2 billion in cash and stock for the $10.8 billion-asset Stellar. The deal, which is expected to close in the second quarter, priced Stellar at 181% of its tangible book value.
Stellar has 52 branches, $7.3 billion in loans, and $9 billion in deposits.
Robert Franklin Jr., Stellar’s CEO, will become vice chairman of Prosperity Bank. Ramon Vitulli, Stellar’s president, will become the bank’s Houston area chairman. Two Prosperity directors, including Franklin, will join Prosperity’s board.
“Together, our increased scale better positions us to invest in future opportunities and serve our customers,” David Zalman, Prosperity’s senior chairman and CEO, said in the release. “This is a rare opportunity to significantly enhance our presence in the Houston area, a market with a diverse economy that is continually attracting investment and has a growing population.”
The deal should be 9.2% accretive to Prosperity’s 2027 earnings per share. It should take less than five years for Prosperity to earn back an estimated 7.8% dilution to its tangible book value.
Prosperity expects to cut about 35% of Stellar’s annual noninterest expenses. It expects to incur $100 million of pretax merger-related expenses.
Stellar was advised by Keefe, Bruyette & Woods and Norton Rose Fulbright US. Wachtell, Lipton, Rosen & Katz advised Prosperity.