Jefferson's Sale Shows Ups and Downs of Post-Crisis M&A

Jefferson Bancshares' efforts to sell itself were marked by several fits and starts over three years, highlighting the fickle nature of consolidation since the financial crisis.

Jefferson's (JFBI) board agreed to sell the $499 million-asset company to HomeTrust Bancshares (HTBI) Asheville, N.C., in January for $51.2 million. But the Morristown, Tenn., company initially asked Keefe, Bruyette & Woods to reach out to would-be suitors in 2011.

KBW's efforts at that time failed to produce an acceptable buyer, HomeTrust disclosed in a registration statement tied to the acquisition. Some potential acquirers were addressing their own operational issues; others were only willing to pay a "significant discount to book value," the filing said.

Jefferson eventually held talks with an out-of-state bank in the first half of last year, but those discussions ended in May with no deal. A month later, HomeTrust's name came up in a meeting between Jefferson's board and KBW. Key members of Jefferson and HomeTrust met in late June.

Things got interesting last November, when another bank that had once expressed interest in Jefferson revisited the possibility of merging. Anderson Smith, Jefferson's president and chief executive, met with senior executive officers of the unnamed bank.

HomeTrust gave Jefferson a written indication of interest on Dec. 9, offering $8 a share evenly split between cash and stock. Nine days later, the other bank submitted a nonbinding indication of interest letter that offered $5.50 to $7.50 a share, with the final value tied to cost savings and accounting adjustments.

Jefferson's board chose HomeTrust, concluding on Dec. 23 that the $1.6 billion-asset company's offer "was superior because of price, the cash component and the relative value of HomeTrust common stock."

Jefferson's directors voted on the merger on Jan. 22. Two directors — Smith and Jack Campbell — abstained from voting. Smith didn't vote because he expected to enter into an employment contract with HomeTrust. Campbell recused himself after Kilpatrick Townsend, Jefferson's legal counsel, decided he had a "material relationship" with Smith because their children are married to each other.

The remaining directors unanimously approved the merger, which was announced on Jan. 23.