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Five months after terminating its planned merger with one suburban Washington, D.C., bank, Alliance Bancshares in Chantilly, Va., has struck a deal to team up with another.
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The companies said in a press release Monday that "irreconcilable differences of opinion regarding a number of matters" had developed and, as such, the boards had decided to terminate their agreement.
November 28
All is not necessarily lost when a deal falls apart, officials at a small bank in Virginia will tell you.
Alliance Bankshares (ABVA) of Chantilly
The old deal would have paid $31.2 million, but the new one — with WashingtonFirst Bankshares of Reston, Va. — has financial and social perks that the other lacked. They include more cash, jobs, and board seats for Alliance's people.
Alliance's cash-and-stock agreement with the ten-branch WashingtonFirst is also free of the complex price-adjustment clauses that tanked its all-stock deal with Eagle Bancorp of Bethesda, Md.
The final price in the Eagle deal was a moving target that depended on Alliance's outstanding shares, deposit levels, severance payments and expenses, among other things.
"The Eagle deal had ten different conversion ratio adjustments that had to be factored into the final price. All of those weren't sorted out," says William E. Doyle, Alliance's president and chief executive. It was not "exactly where that price would have ended up."
"This is much more straightforward," he says.
A collapsed deal is never ideal. It spooks employees and customers and has the potential to label a takeover candidate as damaged goods. It costs money, too: Alliance lost $483,000 last year in part because of $1.2 million in merger expenses for a deal that never came to fruition.
But — for Alliance Bankshares at least — the termination was a sort of M&A mulligan after its first shot landed in a ditch. The publicity surrounding the deal termination also ginned up interest from a broader pool of suitors that want to expand in and around Washington, D.C.
Both deals had an announced value worth about 86% of Alliance's book value.
"I don't believe we were — at the end of the day — penalized in any way for the previous deal falling apart" because "the fact that the deal fell through didn't really change the underlying value of the franchise," Doyle says.
The deal with WashingtonFirst is closer to a merger of equals than the Eagle transaction would have been, Doyle said. It also fulfills Alliance's goal of scaling up in the face of mounting regulatory and competitive costs, Doyle says.
The combined company will have roughly $1.1 billion of assets and sixteen branches in Virginia and Washington D.C.
Alliance shareholders in the new deal are to be paid at least 20% in cash, which is preferable to the all-stock payment they were due with Eagle because it creates some instant liquidity. Alliance is to get three seats on the board of WashingtonFirst, or two more than Eagle had offered.
Fewer of Alliances 60 employees are likely to lose their job than they would have in the other deal because Eagle would likely have had more room to cut branches and back office people, Doyle says.
WashingtonFirst plans to raise $20 million from investors and board members for the deal, which is slated to close in the fourth quarter. WashingtonFirst also intends to list its shares on the Nasdaq; they currently trade over the counter.
Davenport advised Alliance in the deal. Paragon Capital Group advised WashingtonFirst.
