Yahoo Finance UPDATE 4-Regional bank UMB to buy smaller rival Heartland in $2 bln deal
(Updates shares; adds CEO comments in paragraphs 3 and 4; adds details on public offering in last paragraph)
By Manya Saini and Mehnaz Yasmin
April 29 (Reuters) - Regional lender UMB Financial Corp has agreed to buy smaller rival Heartland Financial in an all-stock deal valued at about $2 billion, the banks said on Monday.
Shares of UMB fell 6% to $78.21 in early trading after the company said Heartland stockholders will receive 0.55 shares for each stock they own, valuing the company at $45.74 a share - a 28% premium to Heartland's last closing price.
"As we did our due diligence, we came to realize that their (Heartland's) strong deposit franchise was undervalued by the market at large," UMB CEO Mariner Kemper said on a call with analysts.
"We believe the banks of low cost granular deposit bases will garner a greater premium."
Banks with low-cost deposits tend to garner higher premiums because they typically have lower funding costs and higher profit margins.
The consolidation among the two regional lenders follows the collapse of peer Republic First on Friday and underscores the turmoil in the U.S. banking sector since last year as elevated exposures to commercial real estate also hurt their balance sheets.
Shares of Heartland rose 16% to $41.44. The Denver-based company had $19.4 billion in assets and $16.2 billion in total deposits, as of March 31.
The transaction will take UMB's total assets to $64.5 billion and expand its footprint to five states, California, Minnesota, New Mexico, Iowa and Wisconsin, the companies said in a statement.
The companies expect the deal to close in the first quarter of 2025 and have agreed to pay a termination fee of $70 million if the deal fails to go through under certain circumstances, UMB said in a filing on Monday.
Additionally, UMB also priced a public offering of 2.8 million shares of common stock for net proceeds of about $201.6 million and entered into a forward sale agreement with an affiliate of BofA Securities. The offering is expected to close on May 1. (Reporting by Manya Saini and Mehnaz Yasmin in Bengaluru; Editing by Shailesh Kuber and Shinjini Ganguli)
