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Enterprise Financial (EFSC) Inks Deal to Acquire Seacoast

Zacks Equity Research
·3 mins read

Shares of Enterprise Financial Services Corp EFSC declined 3.2% following the announcement of its deal to acquire Seacoast Commerce Banc Holdings. The deal value has been agreed at $156 million or $15.80 per Seacoast’s share, based on the closing price of Enterprise Financial’scommon stock on Aug 19, 2020.

Headquartered in San Diego, CA, Seacoast operates four full-service banking offices in San Diego and one in Las Vegas. As of Jul 31, 2020, Seacoast was ranked as the 9th largest Small Business Administration lender in the nation, with a history of both strong revenue and earnings growth in recent years.

The transaction is expected to close in late 2020 or early 2021. Notably, on a pro-forma consolidated basis, the combined company would have $9.7 billion in consolidated total assets as of Jun 30, 2020.

Also, the deal is expected to be 4% accretive to Enterprise Financial’s 2021 earnings per share (“EPS”) and more than 10% accretive to its 2022 EPS. Further, the company expects the acquisition to generate an internal rate of return of more than 25%.

"We are excited to announce this transaction and believe the combination of the two organizations is an excellent fit for our business model,” said Jim Lally, president and chief executive officer of Enterprise Financial.

He added, “We believe these niches will help us continue to execute on our strategy of building a reliable and cost-effective funding base and generating profitable growth in the future to the benefit of our collective shareholders.”

Terms of the Agreement

Seacoast will merge into Enterprise Financial, with the latter as a surviving entity. Also, upon closing, Seacoast’s current chief executive officer, Richard M. Sanborn, will join EnterpriseFinancial’s board of directors.

Per the definitive agreement, on completion of the transaction, shareholders of Seacoast common stock will receive 0.5061 shares of Enterprise Financial’s common stock for each common share held and any fractional shares will be adjusted with cash payment. Upon completion, existing Enterprise Financial shareholders will own about 84% of the outstanding shares of the combined company.

The transaction is likely to qualify as a tax-free reorganization for U.S. federal income tax purposes and the acquired company’s shareholders are not expected to recognize gain or loss to the extent of the stock consideration received.

Shares of this Zacks Rank #3 (Hold) company have lost 38.5% so far this year compared with a 32.7% decline of the industry.

 


 

Key Picks

Independent Bank Corporation’s IBCP current-year earnings estimates have moved 37.4% north in the past 60 days. Further, the company’s shares have declined 36.6% in the year-to-date period. At present, it has a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Old Second Bancorp OSBC has witnessed an upward earnings estimate revision of nearly 40% for 2020 in the past 60 days. Moreover, the Zacks Rank #2 stock has lost 39.8% in the year-to-date period.

First Western Financial’s MYFW earnings estimates have moved significantly upward for 2020 in the past 60 days. Moreover, the Zacks #1 Ranked stock has lost 15.2% in the year-to-date period.

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