BancorpSouth Bank and Cadence Bancorporation agreed to be merged in an all-stock deal, forming a strong Texas and Southeastern regional bank, with the combined entity boasting a market value of over $6 billion. Cadence shares jumped 4.2% on April 12, while shares of the Mississippi-based bank plunged 5.5%.
The transaction, which awaits shareholder approval for both companies and certain regulatory approvals, is likely to close in the fourth quarter of this year.
With the assumption of fully realized cost savings, the deal is expected to be 17% accretive to earnings of both BancorpSouth (BXS) and Cadence. That said, the deal should be 14% accretive if 75% of cost savings are realized. Furthermore, upon closure of the deal, it is likely to be immediately accretive to tangible book value per share.
Per the terms of the deal, shareholders of Cadence (CADE) will receive 0.7 shares of BancorpSouth common stock for each share held. Additionally, a one-time special cash dividend of $1.25 per share will be paid to Cadence shareholders.
The merged entity will combine the aesthetics of both brands and logos and will operate as Cadence Bank, the bank said. Additionally, the combined company will be headquartered in both Tupelo and Houston. (See BancorpSouth stock analysis on TipRanks)
BancorpSouth shareholders will own 55% of the combined entity, while the remaining 45% will be owned by existing Cadence shareholders.
BancorpSouth CEO Dan Rollins commented, “Cadence has built an impressive commercial banking franchise that when combined with the strengths of our team at BancorpSouth seems to be a perfect fit. This strategic merger will allow us to expand our reach and offerings with minimal overlap in our existing branch network. Culturally speaking, our mission and values align really well together.”
Following the deal announcement, Raymond James analyst Michael Rose maintained a Hold rating.
Wall Street analysts are cautiously optimistic about the stock’s outlook. The Moderate Buy consensus rating breaks down into 1 Buy rating and 3 Hold ratings. The average analyst price target stands at $34.67 and implies upside potential of 13.7% to current levels. That’s after shares have jumped 43% over the past year.