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Commerce Bancshares Prices Depositary Shares

Zacks Equity Research

In an attempt to raise capital for enhancing shareholders’ value, Commerce Bancshares, Inc. (CBSH) recently announced the pricing of 6 million publicly offered depositary shares. These shares offerings constitute 1/1000th interest in the company’s Series B non-cumulative perpetual preferred stock which have total liquidity preference of $150 million ($25.00 per depository shares). Notably, the preferred stocks form a part of the company’s core capital.

The offering is anticipated to close on Jun 19, subject to certain customary conditions. Further, the joint-book running managers of the public offering include Morgan Stanley & Co. LLC – an arm of Morgan Stanley (MS), Merrill Lynch, Pierce, Fenner & Smith Incorporated of Bank of America Corporation (BAC), and J.P. Morgan Securities LLC of JPMorgan Chase & Co. (JPM).

Simultaneous with the shares offering, Commerce Bancshares entered into an accelerated share repurchase (:ASR) agreement with Morgan Stanley. Per the deal, the former will buy back its shares for $200 million from the latter.

Commerce Bancshares will pay the stipulated amount to Morgan Stanley on Jun 19, and will receive the majority of shares on the same day. Remaining/additional stocks will be delivered once the ASR program is completed (tentatively within the next 12 months). However, the actual number of shares to be repurchased and the price to be paid will be calculated considering the volume-weighted daily average price of Commerce Bancshares’ stocks during the ASR program period.

Further, Commerce Bancshares intends to utilize the funds raised through the latest offering and its excess capital to finance the ASR program. Also, the company expanded its present share repurchase program to 5.0 million shares keeping the ASR program in view.

Given its efficient capital deployment activities, Commerce Bancshares remains an attractive pick for yield-seeking investors. With its strong capital position, the company is anticipated to continue boosting shareholders’ value going forward.

Commerce Bancshares currently carries a Zacks Rank #2 (Buy).

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