Texas Capital Bancshares (TCBI) and Independent Bank (IBCP) have mutually agreed to terminate their merger agreement, previously announced on December 9, under which the parties had agreed to combine in an all-stock merger of equals.
The companies have now entered into a Mutual Termination Agreement which was approved by the board of directors of both companies. Neither party will pay any termination fee. On the news Piper Sandler analyst Brad Milsaps downgraded TCBI from buy to hold, while slashing his price target from $41 to $26 (9% downside potential). However he reiterated his buy rating on IBCP.
David Brooks, CEO of Independent Bank Group (IBTX), said, “While both companies believed in the benefits of the proposed transaction when it was announced, we mutually concluded after careful consideration that, given the significant uncertainty caused by the COVID-19 pandemic and the resulting economic and market environment, it would not be prudent to continue to pursue the combination and integration of our companies at this time.”
He added that the decision will allow each company to dedicate its focus and resources toward ensuring the strength of its business during these unprecedented times.
Following the termination of the merger, Texas Capital also announced that C. Keith Cargill has stepped down as President and CEO and a member of the Board of Directors, effective immediately. However Cargill, who became CEO in 2014, will remain as Vice Chairman until the end of 2020.
Larry L. Helm, who has served as Chairman of the Texas Capital Bancshares Board since 2012, will serve as Executive Chair, CEO and President until a permanent successor has been named, the company said.
In addition, James H. Browning, an independent director and member of the Texas Capital Bancshares Board since 2009, has been appointed Lead Director.
Elysia Ragusa, of Texas Capital, commented, “As part of our focus on succession planning, the Board believes that it is the right time for a transition in leadership as the Company executes a strategy to achieve enhanced operational focus and profitable, long-term value creation.”
Shares in TCBI have plunged 50% year-to-date. Notably all seven analysts covering the stock rate it Hold, while the average analyst price target of $27 indicates a further 7% downside potential lies ahead. (See TCBI stock analysis on TipRanks).
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