Talk about the art of the deal.

Haggling is expected when negotiating a merger, but Great Western Financial and HF Financial took horse-trading to a new level before agreeing to a $140 million deal late last year.

The Sioux Falls, S.D., companies spent nearly four months going back and forth over terms for Great Western's proposed acquisition of HF in a process that included at least six changes in the proposed price and five proposals for the termination fee, according to a Wednesday filing tied to the deal.

HF's investment bank reached out to Great Western in early May. By mid-August, the $9.95 billion-asset Great Western had proposed a deal for the $1.2 billion-asset HF worth $17.75 to $20.50 a share with at least 80% of the consideration involving stock.

Great Western's stock price fell more than 4% over the next two months, coinciding with a broader slide in the Dow Jones and S&P averages. HF's stock price, meanwhile, changed very little as the companies discussed merger terms. (The slide in overall stock prices also led Univest Corp. of Pennsylvania and Fox Chase Bancorp to ramp up efforts to salvage a separate deal.)

Great Western, by Oct. 12, had guided HF toward a deal valued at $19.08 a share. Three days later, however, the company raised its valuation of HF to $19.50. The companies also failed in attempts to negotiate terms to allow for exclusive discussions, the filing said.

After its stock priced jumped 17% between mid-October and mid-November, Great Western proposed lowering the cash consideration to $18.92 a share and reducing the common stock exchange ratio by 8%. Great Western, following a discussion between its investment bank and the firm representing HF, soon reverted back to its offer of $19.50 a share in cash with a higher exchange ratio.

Still, Kenneth Karels, Great Western's president and chief executive, called Michael Vekich, HF's chairman, on Nov. 27 to discuss another adjustment to the deal's exchange ratio due to an increase in the market price of his company's common stock. HF's board "decided not to agree to adjust" the ratio, the filing said.

The final value for the acquisition, announced on Nov. 30, was $19.70 a share.

The companies also haggled over the size of the termination fee

HF's board was concerned early on about the breakup fee, along with calculating the deal's exchange ratio, their ability to pay a regular dividend and "the absence of provisions to protect HF stockholders from a decline in the price of Great Western common stock," the filing said.

Great Western initially proposed a $10 million breakup fee, and HF countered twice, eventually lowering the number to $4.5 million. A second round of negotiations, which ended the day the deal was announced, settled on $5 million.

The filing also disclosed that HF first tried to sell itself in 2012, reaching out to 19 prospects. Six signed nondisclosure agreements, but Great Western was the only institution to submit a potential offer. HF's board determined that the offer "was inadequate and … undervalued HF."

HF also met with three potential suitors from 2012 through 2014 before deciding to focus on internal improvements. The company closed several branches, sold a branch, converted to a state banking charter, prepaid $85 million in Federal Home Loan bank advances and restructured its investment portfolio.

HF's second attempt at selling itself began last May after an unnamed company expressed interest, which prompted the company's board to authorize its investment bank to also contact Great Western. Around that time, HF was also contacted by an unnamed individual who was interested in buying a "substantial minority stake," the filing said. Another unnamed institution also flirted with a deal, but its interest proved short-lived.

Regulatory concerns prompted HF's board to rule out working with the potential investor, and talks with all other institutions fizzled in early October, leaving Great Western as the only company in the running.

The acquisition is a milestone for Great Western since it will push the company over the $10 billion-asset regulatory threshold, where it will face mandatory stress-testing and caps on interchange fees.

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