Lafayette, La.-based IberiaBank, which has more than 40 branch locations and mortgage offices across the state of Arkansas, announced plans Tuesday (Feb. 28) to acquire Miami-based Sabadell United Bank N.A. from Banco de Sabadell S.A. of Barcelona, Spain in a stock-and-cash deal valued at $1.025 billion.
The proposed acquisition of Sabadell United by Iberia has been approved by the board of directors of both banks, and is expected to close in the second half of 2017. Upon completion of the acquisition, subject to customary closing conditions and regulatory approvals, Sabadell United operations in South Florida will be merged into IberiaBank.
The deal will help Iberia maintain a strong foothold in the fast-growing South Florida area as rival Southeastern U.S. regional banks such as Bank of Ozarks and Home Bancshares enter the territory and snap up market share. IberiaBank President and CEO Daryl Byrd said the purchase will bolster the Louisiana regional bank’s current South Florida franchise by joining forces with the Spanish bank’s executive team.
“With a population of over six million people, the greater Miami area is a dynamic market with a strong concentration of commercial and industrial clients that are particularly attractive to us,” Byrd said. “Sabadell United’s deep commercial and retail lending base, combined with strong core deposit funding and quality credit underwriting, provides an excellent fit with our unique culture and business model.”
Byrd continued: “Sabadell United delivers compelling long-term strategic value to IberiaBank by complementing our existing Florida franchise. With this acquisition, our company will have a meaningful presence in each of the five largest markets in the Southeast, further solidifying our status as a premier Southeastern banking franchise.”
Under the terms of the merger agreement, Iberia will purchase Sabadell United for $803 million in cash and approximately 2.61 million Iberia shares, valued at $222 million based on a 10-day average moving price through Feb. 24. Iberia said it expects to finance the cash portion of the transaction, in part, through a public common stock offering of approximately $500 million, to be launched concurrently with this announcement. In addition, IBKC plans to use the $280 million net proceeds of the December 2016 common equity sale to support the acquisition. Banco Sabadell will own approximately 4.9% of IBKC common stock at transaction close.
On a pro forma basis including the common stock offering, Iberia said the deal is expected to be approximately 6% and 10% accretive to the company’s consensus fully diluted earnings per share in 2018 and 2019, respectively. The estimated internal rate of return for the transaction is expected to be approximately 19%, and, therefore, well in excess of Iberia’s cost of capital.
Sabadell United Bank, headquartered in Miami, was organized in 1974 as a nationally chartered commercial bank. The South Florida community bank, which has total deposits and assets of $4.4 billion and $5.8 billion, respectively, offers a variety of banking and wealth management services to corporate and individual customers through its 26 branch locations located in Florida’s Dade, Broward, Palm Beach, Hillsborough, Sarasota and Collier counties.
Goldman Sachs & Co. and UBS Investment Bank served as financial advisors for IberiaBank and Simpson Thacher & Bartlett LLP served as legal advisor. Keefe, Bruyette & Woods served as financial advisor to Banco de Sabadell S.A. and Sabadell United Bank, N.A. and Hunton & Williams LLP served as legal advisor.
IBERIABANK KEEPS LEAD OVER RIVALS
IberiaBank is a financial holding company with 304 combined locations, including 199 bank branch offices and three loan production offices in Louisiana, Arkansas, Alabama, Tennessee, Texas, Florida, and Georgia. The company also has 24 title insurance offices in Arkansas and Louisiana, mortgage representatives in 69 locations in 10 states, and eight wealth management locations in four states and one Iberia Capital Partners office in Louisiana.
The acquisition of Sabadell United Bank will allow Iberia to maintain a healthy lead over Bank of the Ozarks and Arvest as the largest regional bank that serves the Arkansas market. According to the latest data compiled by the Federal Deposit Insurance Corp. (FDIC) at the end of fiscal 2016, Iberia is the 77th largest U.S. bank by assets at $20.7 billion. Bank of the Ozarks is close behind in the 84th spot at $18.4 billion, followed by Arvest Bank two spots lower with assets of $17 billion.
BancorpSouth, based in Tupelo, Miss., also makes it in the top 100 in the 96th spot with assets of $14.6 billion. Home Banchares’ Centennial Bank lies in the 122nd spot with assets of $9.7 billion. The Conway-based regional bank will likely move several spots higher once the FDIC’s next quarterly report is released and the company’s recent acquisition of Landmark Bank in Southeast Florida is accounted for.
However, Simmons First National Bank, which has assets today of $8.4 billion, could see the largest leap forward later this year when the Pine Bluff holding bank completes its recent acquisitions of Stillwater, Okla.-based Southwest Bancorp Inc. and privately held First Texas BHC Inc. of Fort Worth. Those deals could push Simmons well over the $13 billion asset mark and just outside the top 100 U.S. banks.
In after hours trading on the Nasdaq stock exchange, IberiaBank shares were down 5.6% or $4.75 at $80 per share. The Louisiana bank’s shares have traded in the range of $62.66 and $91.10 over the past 52 weeks.