German American acquires United Commerce Bank for $15.3 million | Business
German American Bancorp, Inc. and United Commerce Bancorp announced today that they have entered into a definitive agreement to merge United Commerce into German American. Upon completion of the transaction, United Commerce’s subsidiary bank, United Commerce Bank, will be merged into German American’s similarly-named subsidiary bank, German American Bancorp.
“Over the past thirteen years since its formation in January 2000, United Commerce has built a solid community banking organization focused exclusively on the Bloomington market,” said Mark A. Schroeder, Chairman and CEO of German American. “This transaction provides an excellent opportunity for German American to enhance our presence in the Bloomington market through the combination of our two institutions’ strong market franchises. This merger positions German American very well within the Bloomington market through the combined strength of German American’s existing exceptional team of local financial professionals and solid base of deposit and loan clients with that of United Commerce. We welcome United Commerce’s talented team of local community banking professionals who possess an excellent knowledge of the community and the clients they serve. Additionally, we are also very pleased to be able to welcome the approximately 750 United Commerce shareholders, the vast majority of whom are Bloomington residents, to our family of German American shareholders.”
The transaction is expected to be completed during the fourth quarter of this year. Completion of the transaction is subject to approval by regulatory authorities and United Commerce’s shareholders as well as certain other closing conditions, including maintenance by United Commerce of a certain level of consolidated shareholders’ equity
Under the terms of the definitive agreement, United Commerce common shareholders will receive shares of German American common stock at an exchange ratio of .5456 to .6667 GABC shares for each UCBN share (with the exact number to be fixed at closing based on German American’s pre-closing market price) in a tax free exchange, plus a cash payment of $1.75 per United Commerce share. This cash payment is subject to reduction to the extent that United Commerce’s consolidated common shareholder’s equity is not at least equal to a certain level at the time of closing.
Based on the closing price of German American’s common shares on July 23, of $25.94 and UCBN’s consolidated shareholders’ equity as of June 30, the transaction has a present indicated value of approximately $15.86 per United Commerce common share. This represents a premium of 69% over the closing price of $9.40 of United Commerce’s common shares on July 23. Because the value of the stock portion of this transaction to holders of United Commerce’s common shares as of any future date will be a function of the then-current market price of German American’s common stock, the parties expect that the transaction value will vary over the period of time prior to and at closing in the same direction as the market price of German American’s common shares varies over that same time period.
Based on United Commerce’s number of common shares currently outstanding, and assuming that German American’s shares trade during the specified valuation period prior to closing at an average price more than $22.90 per GABC share and that UCBN’s common shareholders equity is at least equal to the specified pricing level, German American expects to issue approximately 503,000 shares of its common stock, and to pay approximately $1,575,000 cash, for all of the issued and outstanding common shares of United Commerce that are not now owned by German American.
On this basis, the basic transaction has an aggregate indicated value (valuing German American’s common shares at their July 23, NASDAQ closing price) of approximately $14.6 million. The basic transaction value excludes the indicated value of the approximately 4.6% interest of German American in United Commerce’s outstanding stock and the cash payments to be made in cancellation of dilutive stock options and warrants.
The total indicated transaction value is estimated to be approximately $15.3 million. This amount includes an estimated $716,000 of cancellation payments to the holders of United Commerce’s outstanding stock options on the basis of German American’s July 23, 2013 closing price and the number of options outstanding on that date.