Iberiabank To Acquire Florida Bank Group

(RTTNews) - Iberiabank Corp. (IBKC), holding company of the 127-year-old Iberiabank, said that it agreed to acquire Florida Bank Group Inc.

The proposed merger of Florida Bank Group with and into IBKC has been approved by the Board of Directors of each company and is expected to close in the first quarter of 2015.

Completion of the transaction is subject to customary closing conditions, including the receipt of required regulatory approvals and the approval of Florida Bank Group's shareholders.

As per the terms of the merger agreement, shareholders of Florida Bank Group will receive a combination of cash and IBKC common stock. Florida Bank Group common shares are assumed to total approximately 5.05 million shares at closing, assuming approximately 2.47 million common shares outstanding, approximately 2.48 million common shares associated with the conversion of the convertible preferred stock into common shares, and 100,000 warrants outstanding that are assumed to be exercised prior to closing.

Florida Bank Group shareholders shall receive cash equal to $7.81 per share of then outstanding Florida Bank Group common stock, including shares of preferred stock that will convert to common shares in the merger. Aggregate cash consideration is approximately $39.4 million.

Each Florida Bank Group common share will be exchanged for 0.149 share of IBKC common stock, subject to certain market price adjustments provided for in the merger agreement. Based on IBKC's closing stock price on October 2, 2014, of $62.61 per share, the stock consideration would equate to $9.33 per Florida Bank Group common share, or approximately $47.1 million.

At September 30, 2014, Florida Bank Group had 374,400 unvested stock option shares outstanding with an exercise price of $7.74 per share. These stock options are anticipated to be in-the-money at closing. The merger agreement provides that any Florida Bank Group stock options and warrants that remain outstanding immediately prior to closing, whether or not vested, will be cashed out at consummation of the merger. Based on IBKC's closing stock price on October 2, 2014, of $62.61, the cash value for optional shares would be $3.5 million.

IBKC currently estimates annual pre-tax expense reductions associated with the transaction will be approximately 31% of Florida Bank Group's run-rate expenses in 2014. The expense savings are estimated to be fully achieved, on a run-rate basis, within six months of closing. Estimated acquisition and conversion related costs (including lease termination costs) are estimated to be approximately $20 million on a pre-tax basis.

Assuming synergies are fully phased in and excluding acquisition and conversion related costs, the transaction is expected to be neutral to IBKC's 2015 fully diluted earnings per share and mildly accretive thereafter.

The transaction is expected to slightly reduce IBKC's capital ratios, and be less than 1% dilutive to tangible book value per share on a pro forma basis at closing. The tangible book value dilution is anticipated to be earned back in two years. The estimated internal rate of return for the transaction is expected to be greater than 20%, and, therefore, in excess of IBKC's cost of capital.

Florida Bank Group had $9 million of brokered deposits and 110 full-time employees at June 30, 2014. For the quarter ended June 30, 2014, Florida Bank Group reported net income of $1.5 million, a 3.50% net interest margin, 0.61% cost of interest bearing deposits, and 0.61% total funding cost.