Equity announced today it has entered into a definitive merger agreement to acquire all the common stock of Prairie State Bancshares, Inc., of Hoxie, Kansas, the holding company of State Bank.
Following the consummation of the transaction, State Bank will merge with and into Equity Bank, subject to receipt of customary regulatory approvals and closing conditions, including Prairie shareholder approval. Following completion of the merger, State Bank branches will become Equity Bank offices. The merger is expected to be completed in the first quarter of 2017.
The merger bolsters Equity’s presence in Kansas. Including its headquarters in Wichita, Equity will operate 18 branches across the state following completion of the transaction. The branches in Hoxie, Grinnell, and Quinter supplement Equity’s Western Kansas markets of Hays and Ellis. The merger is Equity’s 11th acquisition in the past 14 years, and will be its third merger in the past two years, including Equity’s acquisition of First Independence Corporation on October 9, 2015 and its merger with CFBI. Following completion of the Prairie merger, Equity expects to have $2.2 billion in total assets, with 37 bank locations in Arkansas, Kansas, and Missouri.
Under the terms of the agreement, approved by the boards of directors of Equity and Prairie, at the effective time of merger, the shareholders of Prairie will have the right to receive aggregate consideration of approximately $327.67 per share. The definitive agreement provides that each outstanding share of Prairie common stock will represent the right to receive a fixed exchange ratio of 6.41 shares of Equity Class A common stock and $163.84 in cash. Equity will issue a total of 479,468 shares worth approximately $12.255 million, based upon Equity’s stock valued at $25.56 per share, based on the 30-day volume-weighted average price (“VWAP”) as of October 19, 2016 and pay an aggregate of $12.255 million in cash to Prairie shareholders. The aggregate transaction value of $24.510 million represents approximately 140% of stated tangible common equity of Prairie. The actual aggregate transaction value may be subject to equity adjustments prior to closing, as further set forth in the definitive merger agreement.
Equity expects the merger to be approximately 6% accretive to diluted earnings per share in 2017, and 6% accretive to earnings per share in 2018, with transaction-related and one-time costs of approximately $2.4 million. Equity expects the merger to be approximately 0.9% dilutive to tangible book value per share at closing, inclusive of the estimated purchase accounting adjustments, and expects the tangible book value earnback to be 1.3 years. Finally, Equity expects to remain above all “Well Capitalized” capital ratios as defined by regulatory guidelines, inclusive of the impact of all estimated purchase accounting adjustments.
Prairie was advised by The Capital Corporation LLP of Overland Park, as financial advisor, and Stinson Leonard Street LLP of Kansas City, as legal counsel.