In a move aimed at giving it a top-10 market share in the strategically important Louisville, Kentucky, market — as well as a meaningful earnings boost — German American Bancorp is buying Citizens Union Bancorp.
The $5.3 billion-asset German American agreed to pay $154 million in cash and stock for the $1.1 billion-asset Citizens Union, headquartered in Shelbyville, Kentucky. The deal would add 11 branches and $703 million of deposits to Jasper, Indiana-based German American’s existing Louisville presence, creating a pro forma total of 16 branches and $963 million of deposits.
“This merger with Citizens Union represents another important, strategic opportunity for German American, and enhances our presence in the vibrant Louisville, Kentucky metropolitan market area,” Mark Schroeder, German American’s chairman and CEO, said in a press release Tuesday. “Our combined operations in the broader Louisville market area places us in a top-10 market share position in the largest metropolitan market area in the Commonwealth of Kentucky.”
Schroeder is scheduled to
Citizens Union CEO David Bowling said in the release that German American is “one of the best performing community banking organizations in the nation."
“This strategic partnership … will enable us to deepen and broaden the financial services offerings we provide in all our markets,” Bowling added.
Brian Martin, an analyst who covers German American for Janney Montgomery Scott, said in a research note that the deal is “strategically compelling and financially attractive.”
German American said the acquisition would be 14% accretive to earnings per share in the first 12 months, while tangible book value dilution amounts to 3.2% and will be earned back in two and a half years.
The $154 million purchase price is 155% of Citizens Union’s tangible book value, in line with the average for 2021 transactions. According to Compass Point analyst Laurie Havener Hunsicker, acquirers have paid 154% of tangible book value so far in 2021.
Under the terms of Tuesday’s deal, which is expected to close in the first quarter of 2022, Citizens Union shareholders will receive 0.78 shares of German American stock and $13.44 in cash for each of their shares.
The combined company would have $6.4 billion of assets, $5.3 billion of deposits and 83 branches, with 52 in Indiana and 31 in Kentucky. Bowling and Citizens Union President Daryl Traylor will have senior advisory roles as regional chairman and vice chairman, respectively, German American said.
Citizens Union would be German American’s sixth acquisition since 2011 and the third of a Kentucky bank. German American acquired the $476 million-asset Citizens First Corp. in Bowling Green in July 2019. It acquired the $572 million-asset First Security Inc. in Owensboro in October 2018.
Citizens Union’s agreement with German American requires it to pay a $6.5 million termination fee if the deal falls through. Citizens United's directors and certain other prominent shareholders who collectively control approximately 60% of the company’s outstanding shares have agreed to vote in favor of the deal.
