First Defiance Financial and Commercial Bancshares jointly announced the signing of a definitive merger agreement under which First Defiance will acquire Commercial in a transaction valued at $51.00 per share.
The transaction price is based on the 20-day average closing price of First Defiance common stock of $43.19 ending August 22, 2016.
Upon completion, Commercial’s wholly owned subsidiary, Commercial Savings Bank, will merge into First Defiance’s subsidiary bank, First Federal Bank of the Midwest.
Commercial Savings Bank is a community bank founded in 1920 and operates seven full-service banking locations. As of June 30, 2016, Commercial had $342m in assets, $298m in loans and $301m in deposits. Upon completion of the acquisition, the combined organization is expected to have approximately $2.8bn in assets, and the transaction will enhance and expand First Defiance’s presence in northwestern and north central Ohio.
“Commercial is a high-quality bank with an established customer base, a strong balance sheet and similar core values. This combination will be an excellent fit culturally,” said Donald P. Hileman, President and Chief Executive Officer of First Defiance. “In addition, this merger provides an extension of our growing market area. We are excited to serve Commercial’s customers with additional products and services and look forward to growing in Commercial's communities.”
Robert E. Beach, President and Chief Executive Officer of Commercial, stated, “We are pleased with the opportunity to partner with a company that has a culture and attitude towards customers similar to our own. First Federal has a long-standing tradition of community involvement and a philosophy of true community banking, which means local decision making, commitment to community and personalized customer service.”
The acquisition is expected to close in the first quarter of 2017 and is subject to Commercial shareholder approval, regulatory approval, and other conditions set forth in the merger agreement.
Pursuant to the terms of the merger agreement, which has been unanimously approved by the Board of Directors of both companies, Commercial common shareholders will have the opportunity to elect to receive 1.1808 shares of First Defiance common stock or cash in the amount of $51.00 per share, subject to adjustment as provided for in the merger agreement.
Total consideration for Commercial’s common shares outstanding will consist of 80% First Defiance stock and 20% cash, and the aggregate transaction value of $63m (based on the 20-day average closing price of First Defiance common stock of $43.19 ending August 22, 2016) includes an additional cash payment of approximately $1.5m to cancel outstanding stock options.
The transaction, after one-time costs, is expected to be immediately accretive to earnings, with a tangible book value earn-back of approximately 2 years. First Defiance will add one current director of Commercial Bancshares to the Board of First Defiance upon the effective date of the transaction.
First Defiance Financial Corp. was advised by the investment banking firm of Raymond James & Associates, Inc., and the law firm of Vorys, Sater, Seymour and Pease LLP. Commercial Bancshares, Inc. was advised by the investment banking firm of Keefe, Bruyette and Woods, a Stifel company, and the law firm of Shumaker, Loop & Kendrick, LLP.