Alpine Bancorp. in Belvidere, Ill., relied on more than just top management and directors as it mulled how to sell itself.
The $1.3 billion-asset company, which agreed in October to sell to Midland States Bancorp in Effingham, Ill., also formed an “evaluation team” of senior executives to participate in the sales process, according to a regulatory filing tied to the companies’ planned $181 million merger.
Members of the evaluation team were divided into smaller groups, each tasked with appraising any potential offer from the perspective of four constituencies: shareholders, employees, customers and community members.
Sellers typically rely on the top C-suite executives to analyze a deal. In this case, other managers played an important role throughout the process and were privy to confidential information as Alpine negotiated its sale. The filing did not identify the executives; a call to President and CEO Rex Entsminger was not immediately returned.
Rob Funderburg Jr., Alpine’s chairman, came up with the idea of forming the nine-member evaluation team, said Rex Entsminger, the company's CEO. The idea was to get more input on a potential sale while allowing more managers to showcase their skills during the process.
"I was skeptical of letting too many people in because of the confidential information involved," Entsminger said. "But because we had such a great team dedicated to our cause nothing was ever leaked. Our trust was not let down."
Alpine’s management team first began to consider selling earlier this year, vetting investment banks between mid-February and early April, the filing said. The company hired Sheshunoff & Co., which spent about a month contacting 15 potential buyers.
By mid-May, five institutions, including Midland, had executed nondisclosure agreements to receive confidential information about Alpine. That was also when Alpine’s top executives formed the evaluation team.
Midland made its first offer on June 12, proposing a cash-and-stock deal that valued Alpine at $21 a share. Midland also insisted that certain shareholders, largely members of the Funderburg family, pledge their shares for any deal struck.
The family, which kept an Alpine predecessor solvent during the Great Depression, owns at least 79% of the company's stock, the filing said.
An unnamed bank also offered to buy Alpine at a price that was “materially less” than Midland’s proposal.
The offers were reviewed by Alpine’s top executives, legal counsel, investment bank and the evaluation team. The review focused on the amount and type of consideration, relative strengths and weaknesses of each suitor, each institution’s employment practices and the likelihood of completing a deal, among other things.
Alpine determined that Midland had made the superior proposal, the filing said.
The evaluation team knew about the offers before the collective board, Entsminger said. "If the team had said none of the offers were good we wouldn’t have gone down that path," he added.
In late August, Midland raised its offer to $21.26 a share by increasing the amount of stock it would issue by 9%, to roughly 4.5 million shares. Midland also agreed to absorb the costs of Alpine’s employment agreements. The company later committed to a $500,000 dividend allowance for Alpine shareholders.
Alpine’s evaluation team was involved in assessing the updated offer and recommending that the company move forward with negotiations. Certain members of the team, which had recommended working to finalize a deal, were also present during a Sept. 25 meeting with the board to discuss the sales process and review Midland’s offer.
Midland’s board unanimously approved the merger agreement on Oct. 6, while Alpine’s directors did the same a week later. By the time it was announced, on Oct. 16, the deal valued Alpine at $22.38 a share, or a 172% to its tangible book value.
Midland States, which went public last year, completed a $40 million private placement of subordinated debt to help finance the Alpine acquisition. The deal is expected to close in the second quarter.
Rob Funderburg owns 28% of the company. He is expected to join Midland’s board after the deal closes. He will also be allowed to remain a director past 2019 if his Midland holdings have a market value of $10 million or more.