The resulting combination is designed to create immediate value for shareholders of both companies. The transaction also fits well with United’s geographic expansion strategy of focusing on major southeastern metro markets by enhancing its position in the attractive Greenville and Upstate South Carolina area.
United is based in Blairsville, Georgia, with $7.7 billion in total assets. United’s bank subsidiary, United Community Bank, is one of the Southeast’s largest full-service banks, operating 104 offices in four states: Georgia, North Carolina, South Carolina and Tennessee.
Palmetto is the third largest banking institution headquartered in South Carolina with total assets of $1.2 billion, loans of $832 million and deposits of $967 million.
Its bank subsidiary, The Palmetto Bank, is a 108-year old community bank that serves Upstate South Carolina through 25 branch locations in nine counties along the vibrant I-85 corridor. The Palmetto Bank will merge into and operate under the brand of United Community Bank.
Under the terms of the agreement, which has been unanimously approved by the Boards of Directors of both companies, Palmetto shareholders will have the right to receive $19.25 in cash or 0.97 shares of United common stock, or any combination thereof, for each share of Palmetto common stock.
The cash and stock elections are subject to proration to ensure that 30% of the outstanding shares of Palmetto common stock will be exchanged for cash and 70% of the outstanding shares of Palmetto common stock will be exchanged for shares of United common stock in the merger.
Based on United’s ten-day average closing price of $18.78 per share as of April 21, 2015, the weighted-average price per Palmetto share is $18.53, and the aggregate deal value is approximately $240.5 million.
Under the proposed terms, the transaction is expected to be immediately accretive to United’s fully diluted earnings per share with mid-to-high single digit accretion in 2016 and double-digit accretion in 2017.
Return on assets should increase proportionately and the increase in United’s pro forma return on tangible common equity is expected to approach 200 basis points. The estimated tangible book value dilution is anticipated to be earned back within five years, including transaction and restructuring costs.
"We are growing our presence in southeastern metro markets, including and particularly Greenville and the Upstate South Carolina area," said Jimmy Tallent, Chairman and Chief Executive Officer of United. "Joining forces with Palmetto will greatly enhance our presence in these markets, creating value for shareholders and customers of both organizations."
Tallent continued, "Sam Erwin, Lee Dixon and their team have done an excellent job building Palmetto into an outstanding Upstate South Carolina community bank. Palmetto and United are a great fit, with an opportunity to grow an even stronger South Carolina franchise. Current and future customers of both our banks will benefit from expanded services, products and locations."
Palmetto Chairman and Chief Executive Officer Samuel Erwin said, "We are excited to partner with United to provide enhanced value to our shareholders, customers, teammates and communities. United has long prided itself on its strong commitment to the client, a model that we know well. United’s strong community bank culture, sound financial condition, earnings growth, and comprehensive business expertise make United an excellent choice for Palmetto to join."
Lynn Harton, President and Chief Operating Officer of United stated, "Palmetto is a uniquely attractive platform for us to accelerate our growth in Upstate South Carolina. We are excited to join forces with the Palmetto team to truly become the Upstate’s community bank."
The merger, which is subject to regulatory approval, the approval of the shareholders of Palmetto, and other customary conditions, is expected to close in the fourth quarter of 2015.
