Eight Reasons Deals Get Done Beyond Price
June 19, 2014 11:00 AM
OmniAmerican (OABC) had a good problem earlier this year: competing offers from eager buyers. The Texas bank, which "accepted a slightly smaller price " from Southside Bancshares (SBSI), explained its reasoning in a regulatory filing. Here are the highlights.
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Dividend Yield
Southside currently has a 2.7% dividend yield that was "significantly" higher than the payout of the other unnamed suitor. That should benefit OmniAmerican's smaller investors, who rely heavily on dividends.
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Board Representation
OmniAmerican is getting two board seats at Southside once the deal is completed, which gives it a voice at the company. The filing never mentions a similar offer from the other bank.
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Potential for Stock Appreciation
Directors at OmniAmerican took into consideration that Southside had a lower price-to-earnings ratio than the other suitor. In theory, that could mean a higher stock price as Southside's valuation aligns with its earnings power.
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Stock Performance
The filing notes that Southside has enjoyed strong, consistent stock performance in recent years. OmniAmerican's board was concerned about the "historical volatility" of the other suitor's stock.
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Stock Dividends
Southside has a history of giving shareholders an annual 5% stock dividend, which was appealing to OmniAmericans board.
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Preferable Loan Mix
OmniAmerican compared the loan portfolios of its suitors. They liked the fact that Southside has a smaller concentration of commercial real estate loans compared to the other bank.
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Regulatory Considerations
OmniAmerican's board said it believes Southside will have an easier time getting the deal approved than the other suitor. The filing also pointed to Southside's excellent CRA rating.
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Culture and Strategy
OmniAmerican's board liked Southside's commitment to retail banking, compared to a "smaller retail presence" at the other bank. OmniAmerican and Southside also seemed to click culturally, the filing added.
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