Speculation about the takeover of Southside Bancshares ended Tuesday with rival Allegiant Bancorp's announcing an agreement to buy its St. Louis neighbor for $120 million in cash and stock.
The deal, Allegiant's second in-market acquisition in the last year, would create the fifth-largest banking institution in Missouri - one with assets of $1.9 billion and 35 branches after a shutdown planned for four branches. It is expected to close in the fourth quarter, and the combined company is to take Allegiant's name.
Thomas A. Daiber, executive vice president and chief financial officer at Allegiant, said the location of $737 million-asset Southside's 16 branches and its trust department were especially appealing to his company. He said the merger would give Allegiant "the best geographical coverage" of the area's community banks and that he hopes to make use of Southside's trust experience in expanding Allegiant's trust business.
Southside's future has been a subject of speculation since January, when First Banks Inc., also of St. Louis, expressed interest in buying it in documents filed with the Securities and Exchange Commission. In the same month Southside announced a share buyback program that would let directors who were considering leaving the company sell their stock. Mr. Daiber said discussions between Allegiant and Southside had been going on for several months.
Rumors that Southside was for sale have pushed its stock up more than 50% since Jan. 1. At midday Tuesday it was trading at $13.27, up nearly 11% from its Monday close. Allegiant's stock was trading at $10, down 4.3%.
Southside is the holding company of 102-year-old South Side National Bank and three other community banks. Mr. Daiber said there is overlap between the Southside branches and those that belonged to $299 million-asset Equality Bancorp, which Allegiant bought in November. The headquarters of Southside and Equality are within four blocks of each other, so one will be kept as a bank and the other used for administrative offices.
Mr. Daiber said some jobs are to be eliminated but that Allegiant would try to reduce the staff through attrition.
Analysts say the deal is a smart move on the buyer's part.
"I think they're complementary franchises and it will be a good strategic fit for Allegiant," said Daniel E. Cardenas, an analyst with Howe Barnes Investments in Chicago. Allegiant goes after small- and middle-market businesses, and Southside has established relationships in those segments, Mr. Cardenas pointed out.
Joseph A. Stieven, director of financial institution research at Stifel Nicolaus, a St. Louis firm that advised Southside in the deal, said, "On a percentage basis this is a big in-market transaction for Allegiant. In-market transactions are the ones with the best chance to work."
The deal's price to book value was 1.7% and the premium paid on deposits 10.6%. Southside shareholders are to receive either $14 in cash or 1.39 shares of Allegiant stock for each share of Southside stock.