Poage Bankshares (PBSK), in Ashland, Ky., has agreed to acquire its crosstown rival, Town Square Financial, for $14.7 million. Meanwhile, Poage has been targeted by an activist investor who plans to seek a board seat.
Town Square shareholders can choose between cash and stock, with the final aggregate consideration split between 55% stock and 45% cash, Poage said in a news release. Poage said the terms represented a 104% premium to Town Square's tangible book value. The banks expect to close the deal in the first or second quarter.
The merger agreement was announced Monday, about two hours after Joseph Stilwell, a New York activist investor, filed regulatory documents saying that he planned to seek board representation.
"We have lost confidence that [Poage's] board of directors and management are pursuing shareholder-friendly capital allocation policies," Stilwell said in the filing.
Stilwell, who owns about 9.9% of Poage, said he was unaware of Poage's plans before the acquisition was announced, and that he will vote against the deal.
"If [the Town Square deal] goes through, not only will we run someone for the board, but we'll be running from a platform that [Poage] should be sold," Stilwell said Tuesday afternoon.
Poage is overpaying for another bank, when it should be "trying to get its own house in order first," Stilwell said.
"It's exactly the reverse of what should be happening," Stilwell said. "They're using a cheap currency, a.k.a. their own stock, to pay up for a bank with a lot of problem issues."
Gene Coffman, Poage's president and chief executive, could not be reached Tuesday night for response to Stilwell's comments.
Poage, the holding company for Home Federal Savings and Loan Association, said Monday that it expects the Town Square deal to be more than 70% accretive to earnings in the first full year of combined operations.
The combined bank would have about $450 million of assets and operate 10 offices, primarily in the Ashland area.
KBW advised Poage and Luse Gorman Pomerenk & Schick was its legal counsel. Sheshunoff & Co. advised Town Square, and Hunton & Williams gave it legal advice.