Updated to include Moody's review and new stock prices
GULFPORT, MISS. (
) -- Regional bank M&A continued Wednesday, this time with two small Gulf Coast banks.
Hancock Holding Co.
agreed to acquire
( WTNY) in a stock-for-stock transaction totaling $1.49 billion.
Shareholders of Whitney will receive 0.418 shares of Hancock Bank's common stock per one share of Whitney's stock, the banks said. The exchange value of Whitney shares would be $15.48, based on Hancock's Dec. 21 closing price of $37.04 - a premium of 42% based on Whitney's closing stock price of $10.87.
The deal is expected to be completed by the end of June 2011.
is starting to gather steam as the year comes to an end. Many sector observers are predicting bank M&A to pick up in the New Year through 2013 as banks - particularly smaller regional banks - have trouble dealing with ongoing credit headwinds and revenue challenges given the new regulatory environment.
Marshall & Ilsley
( MI) agreed last week to be acquired by
Bank of Montreal's
U.S. division, Harris Bank.
PNC Financial Services
was sniffing around at
also buoyed bank stocks last week.
said it would acquire
and is looking to further penetrate the U.S. market. TD Bank has previously expressed its plan to have an extensive banking franchise along the eastern seaboard, of which it is steadily gaining share.
( WL) agreed to a take-under by
The combined Gulf Coast-based bank will have approximately $20 billion in assets; $16 billion in deposits; $12 billion in loans and 305 branches across Texas, Louisiana, Mississippi, Alabama and Florida.
"We believe this agreement presents an unprecedented opportunity to enhance shareholder value and strengthen the financial options available to individuals and businesses from Texas to Central Florida," Hancock's CEO Carl J. Chaney said in a statement.
Hancock expects to realize "substantial" cost savings of $134 million before taxes once the merger is fully phased in by 2013, it said. It also expected revenue synergies of 19% by that time.
"Not only does this transaction create significant shareholder value, I believe it is also the best course of action for our employees, customers and communities," said Whitney Holding Corporation Chairman and CEO John C. Hope, III.
Wunderlich Securities analyst Kevin Reynolds already slapped a buy rating this morning on Hancock Bank.
"We are upgrading shares of Hancock Holding Company (HBHC) to Buy on news of its transformational acquisition of Whitney Holding Company (WTNY)," Reynolds writes in a note to clients. Hancock is acquiring Whitney for 1.7 times tangible book value in the all stock transaction
"For both WTNY and HBHC shareholders, this is a spectacular transaction, in our view, and the long-term benefits should result in significantly higher overall franchise value on a combined basis," the note says.
On the surface the combination seems like a strategic win, however, Moody's Investors Service on Wednesday placed all long-term and short-term ratings of Hancock and its subsidiaries under review for possible downgrade. Moody's currently has an A2 issuer rating on the holding company. Its lead bank, Hancock Bank, is rated B- for unsupported bank financial strength, the ratings agency said.
The downgrade review will focus on merger integration challenges, as Whitney is "40% larger than its size and has asset quality problems," Moody's said. It will also look at how aggressively Hancock writes down Whitney's loan portfolio as well as the expected performance of the large commercial real estate exposure of both companies and, finally, Hancock's capital management plans.
In contrast, Moody's put Whitney and its subsidiaries on review for possible upgrade. Whitney's long term issuer ratings were at Baa1, while its subsidiary, Whitney National Bank had an unsupported bank financial strength at C. Prior to today's announcement, Whitney's long-term ratings had been under review for possible downgrade, Moody's said.
Following the merger, Hancock said it plans to exercise a common stock raise of $200 million, which will contribute to the repayment of Whitney's TARP funds. Following restructuring charges and the common stock raise Hancock expects its tangible common equity ratio to be 8%, it said.
Whitney Bank's stock surged 29% to $14 on the news; Hancock Bank shares dropped 6.6% to $34.56.
-- Written by Laurie Kulikowski in New York.
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