Enterprise Financial Services Corp, the holding company of Enterprise Bank & Trust, and Seacoast Commerce Banc Holdings, the holding company of Seacoast Commerce Bank, announced today that EFSC, EB&T, SCBH and Seacoast have entered into a definitive merger agreement in a transaction valued at approximately $156 million, or $15.80 per SCBH share, based on the closing price of EFSC’s common stock on August 19, 2020. On a pro forma consolidated basis, the combined company would have approximately $9.7 billion in consolidated total assets as of June 30, 2020.
The transaction is expected to be approximately 4% accretive to Enterprise’s 2021 earnings per share (excluding the impact of one-time transaction expenses) and over 10% accretive to its 2022 earnings per share, after giving effect to estimated fully phased-in transaction synergies. Estimated tangible book value per share dilution to EFSC is expected to be earned back in less than three years under the crossover method including CECL “Day Two” accounting treatment. The acquisition is expected to generate an internal rate of return in excess of 25% for Enterprise.
Headquartered in San Diego, California, Seacoast had approximately $1.3 billion in total assets, $1.1 billion in loans, and $1.0 billion in deposits as of June 30, 2020. Seacoast operates four full- service banking offices in San Diego, California and one in Las Vegas, Nevada. In addition, Seacoast has 20 loan production offices and six deposit production offices across the country. As of July 31, 2020, Seacoast was ranked as the 9th largest Small Business Administration lender in the nation and has a history of both strong revenue and earnings growth in recent years. During the last ten years, Seacoast has funded over $2 billion in SBA loans while only incurring nominal credit losses over that same time period. As of June 30, 2020, approximately 52%, or $569 million, of Seacoast’s $1.1 billion loan portfolio was 100% guaranteed by the U.S. Government.
“We are excited to announce this transaction and believe the combination of the two organizations is an excellent fit for our business model,” noted Jim Lally, President and Chief Executive Officer of EFSC. “Rick and his team have built an extraordinarily successful SBA platform that will complement our commercial and specialty lending verticals, with the SBA division continuing to be led by David Bartram and Rick Visser. In addition, Seacoast’s depth
and expertise in successfully attracting specialty deposit relationships in the property management, homeowners’ associations, and 1031 exchange industries will further diversify our funding base. 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.”
Richard M. Sanborn, Chief Executive Officer of SCBH added, “With Enterprise, we have taken the next step to move our organization forward with a partnership that we believe provides the infrastructure and balance sheet strength to continue our growth path. Both Enterprise and Seacoast have a shared set of values and commitment to service. I am excited for what this acquisition will provide for our combined customers, associates, and shareholders. While the whole stock nature of the transaction provides an attractive premium based on our current trading price, as the economy ultimately stabilizes and equity prices improve, we believe the earnings power of the combined organization will deliver enhanced value to both sets of shareholder groups.”
Under the terms of the definitive agreement, upon consummation of the transaction, each holder of SCBH common stock will receive 0.5061 shares of EFSC common stock for each SCBH common share held and cash in lieu of fractional shares. The transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes and SCBH shareholders are not expected to recognize gain or loss to the extent of the stock consideration received.
Existing Enterprise shareholders will own approximately 84% of the outstanding shares of the combined company, and SCBH shareholders are expected to own approximately 16%.
The transaction, which has been unanimously approved by the boards of directors of the Company, EB&T, SCBH, and Seacoast, is expected to close in late 2020 or early 2021, subject to satisfaction of customary closing conditions, including receipt of regulatory approvals and approval of SCBH’s shareholders. In the transaction, SCBH will merge into Enterprise, and Seacoast will merge into EB&T, with Enterprise and EB&T the surviving entities. Upon closing of the transaction, SCBH Chief Executive Officer Richard M. Sanborn will join the Enterprise board of directors. SCBH’s directors and executive officers, have entered into agreements with the Company pursuant to which they have committed to vote their shares, which represent approximately 31% of SCBH’s issued and outstanding common stock, in favor of the acquisition.