Enterprise Financial Services, the holding company of Enterprise Bank & Trust, and Seacoast Commerce Banc Holdings, the holding company of Seacoast Commerce Bank, entered into a definitive merger agreement in a transaction valued at approximately $156 million, or $15.80 per Seacoast Commerce Banc Holdings share, based on the closing price of Enterprise Financial Services’ common stock on Aug. 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 more than 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 Enterprise Financial Services is expected to be earned back in fewer 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, Seacoast had approximately $1.3 billion in total assets, $1.1 billion in loans and $1 billion in deposits as of June 30, 2020. Seacoast operates four full-service banking offices in San Diego and one in Las Vegas. 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 ninth largest Small Business Administration lender. During the last 10 years, Seacoast has funded more than $2 billion in SBA loans. 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,” Jim Lally, president and CEO of Enterprise Financial Services, said. “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.”
“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,” Richard M. Sanborn, CEO of Seacoast Commerce Banc Holdings, said. “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 Seacoast Commerce Banc Holdings common stock will receive 0.5061 shares of Enterprise Financial Services common stock for each Seacoast Commerce Banc Holdings 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 Seacoast Commerce Banc Holdings’ 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 Seacoast Commerce Banc Holdings’ shareholders are expected to own approximately 16%.
The transaction, which has been unanimously approved by the boards of directors of the companies, 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 Seacoast Commerce Banc Holdings’ shareholders. In the transaction, Seacoast Commerce Banc Holdings will merge into Enterprise Financial Services and Seacoast Commerce Bank will merge into Enterprise Bank & Trust, with Enterprise Financial Services and Enterprise Bank & Trust the surviving entities. Upon closing of the transaction, Sanborn will join the Enterprise board of directors. Seacoast Commerce Banc Holdings’ directors and executive officers entered into agreements with Enterprise pursuant to which they have committed to vote their shares, which represent approximately 31% of Seacoast Commerce Banc Holdings’ issued and outstanding common stock, in favor of the acquisition.
Boenning & Scattergood served as financial advisor to Enterprise Financial Services and Holland & Knight served as legal counsel. Keefe, Bruyette & Woods, a Stifel Company, served as financial advisor to Seacoast Commerce Banc Holdings and Sheppard, Mullin, Richter & Hampton served as legal counsel.