United Bankshares, Inc. UBSI, based in West Virginia, recently entered into an all-stock acquisition deal with Charleston, SC-based Carolina Financial Corporation CARO. Per the deal, both companies will merge in an all-stock merger for a deal valued at around $1.1 billion. The combined entity will operate under the name of United Bankshares.
The deal, approved by the boards of both banks, upon completion will place the new entity among the top 35 banks in the United States, in terms of market capitalization. The single firm will be positioned as the leading community bank in the Southeast and Mid-Atlantic. Moreover, the combined entity will operate across more than 200 locations in opportunistic markets in the United States.
The new entity is aimed at capturing market opportunities and boosting the client base. Moreover, the companies’ expanded scale, technological advancement and increased product offerings will help capitalize its market share.
However, the deal awaits certain customary approvals by shareholders of both companies and other regulatory approvals. The transaction is anticipated to close in second-quarter 2020, subject to satisfaction of certain closing conditions.
Richard M. Adams, chairman and CEO of United, said, “We are excited about our partnership with Carolina Financial Corporation and the opportunities it affords both organizations. Our companies share complementary cultures, a commitment to our customers, and a focus on serving our communities. This transaction represents a significant step towards continuing to grow United’s presence in the Carolinas.”
Notably, United Bankshares, with branches in seven states, along with the District of Columbia, initiated banking activities in the North and South Carolina markets in 2017.
Terms of the Deal
Per terms of the deal, each common shareholder of Carolina Financial will get stock equivalent to 1.13 of United Bankshares shares, for every Carolina Financial share held. Specifically, United Bankshares will acquire 100% of the outstanding shares of Carolina Financial.
United Bankshares, with around $19.8 billion in assets, and Carolina Financial, with $3.98 billion in assets, will create the combined entity with $25 billion in assets. Strategically, the new entity will grow on advanced technologies, innovative products and create a competitive edge in the Southeast and Mid-Atlantic markets.
Also, the combination will serve various commercial, consumer and small business clients with diversified products.
Notably, the pending acquisition of North Carolina-based Carolina Trust BancShares, Inc. CART by Carolina Financial is likely to close this year.
Sandler O’Neill & Partners, L.P. acted as financial advisor to United Bankshares, while Raymond James & Associates, Inc., a subsidiary of Raymond James Financial, Inc. RJF served to Carolina Financial.
In the current scenario, banks are moving toward consolidation to dodge the heightened costs of regulatory compliance and increased investments in technology, in a bid to be competitive. Furthermore, the current interest-rate scenario has also taken a toll on these financial firms’ net interest margin, thereby adversely dampening overall profitability.
Therefore, such initiatives are instilling investors’ optimism in banks’ growth prospects. Remarkably, shares of United Bankshares and Carolina Financial have rallied nearly 2.7% and 15%, respectively, over the last six months as compared with 6.2% growth recorded by the industry.
Currently, both United Bankshares and Carolina Financial carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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