Synovus Financial in Columbus, Ga., had scant competition as it pursued its
Four banks were interested in buying FCB Financial Holdings in Weston, Fla., and the $31 billion-asset Synovus was the only institution to bid, according to a
At one point during negotiations with Synovus, FCB’s board acknowledged during a special meeting that there were “limited prospects that any other party would have an interest in a potential transaction,” the filing said.
One issue could have been FCB’s size. At $11 billion in assets, the company had a rather limited range of banks that would have been in a position to make a deal happen. Synovus ended up agreeing to pay nearly $3 billion in what is the second-biggest bank deal announced this year.
"Synovus was one of the few banks who could afford to buy FCB, which is ultimately why it was the only bidder," said Christopher Marinac, an analyst at FIG Partners.
“A lot of banks that would like to acquire in Florida are of a similar size as FCB,” said Brady Gailey, an analyst at Keefe, Bruyette & Woods.
Another factor may have been the fact that FCB has significant exposure in Florida, especially boom-bust markets such as Miami and Naples.
“Florida has been booming for a while and it feels like we’re closer to the next bust than the next boom,” Gailey said. “I could see some companies, bigger picture, not wanting to buy a bank that is 100% in Florida.”
FCB, for its part, decided to explore selling itself in March, hiring three investment banks as advisers. Eight potential buyers, including Synovus, were contacted; four quickly passed on buying FCB.
The first meeting between Kessel Stelling, Synovus’ CEO, and Kent Ellert, his counterpart at FCB, took place on April 10. The chief financial officers for both companies were also present. During the meeting, Synovus requested more information about FCB’s loan portfolio.
Three days later, published reports disclosed that FCB was looking to sell itself, spurring a 6% increase in the company’s stock price, the filing said.
By mid-May, two of the remaining banks walked away without submitting a bid. Another unnamed bank, which had suffered from a declining stock, ended discussions in late June.
FCB and Synovus by that time had met several times. Synovus hosted Ellert at its corporate office in mid-April. Another meeting took place on May 8 in Naples, Fla.
Synovus presented its first offer on June 26 during a meeting in Atlanta, proposing to exchange 1.05 shares of its stock for each FCB share. Less than two weeks later, Synovus raised the proposed exchange ratio to 1.055 shares, which at that time valued FCB at roughly $2.6 billion.
Stelling told Ellert the bid “would be Synovus’ best and final offer,” the filing said.
Several factors, including an increase in Synovus’ stock price between the time of Stelling’s offer and the deal’s announcement, contributed to a rise in the acquisition’s final valuation. In fact, the amount represented a nearly 2% discount to FCB's closing stock price the day before the deal was announced.
FCB sent Synovus a draft merger agreement on July 6; a revised version was returned to FCB five days later. The companies spent most of July conducting due diligence on business, legal, regulatory and technology matters.
It was during a July 18 special meeting that FCB’s board discussed the unlikely odds of finding another willing buyer.
Directors at FCB and Synovus unanimously endorsed the deal in separate meetings held on July 23. The acquisition, which was
The deal is the first traditional whole-bank acquisition for Synovus since it bought Banking Corp. of Florida in April 2006. The FCB purchase is the second-biggest bank deal announced this year, based on value, trailing only Fifth Third Bancorp’s $4.6 billion agreement to buy MB Financial.
“This acquisition will expand our presence in the high-growth south Florida marketplace while leveraging FCB’s market leading reputation, culture, and successful organic growth platform,” Stelling said in a press release announcing the deal.
Synovus expects to cut about $40 million in noninterest expenses as part of the integration. The deal should be 6.5% accretive to Synovus’ 2020 earnings per share, excluding merger-related expenses. It should take less than two years to earn back the expected 3.3% dilution to Synovus’ tangible book value.
Over the long run, Synovus should benefit from other banks’ lack of interest in FCB, Gailey said.
“It was priced well and the EPS accretion and tangible book value dilution are favorable,” he added. “I think Synovus has the opportunity over next two or three years to apply their conservative, nicely profitable business model to FCB. And there’s a nice opportunity to remix FCB’s deposit base to reflect its own.”
"Investors have to be patient to see how Synovus closes and integrates the merger," Marinac said. "There is definitely real potential with the combined company."
Ellert and James Baiter, FCB’s chief credit officer, have five-year employment agreements with Synovus. Ellert will become Synovus’ Florida market president, while Baiter will serve as regional credit officer for the company’ Florida operations.
Ellert will receive a minimum annual salary of $525,000 with the potential incentive bonus equal to his base salary. Baiter’s minimum salary will be $400,000; his bonus potential is equal to 60% of his base salary.
Ellert is also set to receive a $11.9 million lump-sum change-in-control payment once the deal closes. Baiter will be paid $1.4 million. Vincent Tese, FCB’s executive chairman, and Les Lieberman, the company’s executive vice chairman, will each receive $4 million at the time of closing.
