Yadkin Valley to buy American Community for $92 million
BANGALORE (Reuters) - Bank holding company Yadkin Valley Financial Corp (YAVY.O) agreed to acquire American Community Bancshares Inc ACBA.O in a cash and stock deal worth about $92 million to expand into South Carolina, the companies said.
Shares of American Community surged as much as 61 percent and those of Yadkin sank 29 percent Wednesday.
"I think it's a very positive deal for both sides. They have acquired a very clean bank, with a very strong capital base and a very healthy loan loss reserve," Janney Montgomery Scott analyst Douglas Rainwater told Reuters.
American Community shareholders can choose to receive either $12.35 in cash -- a 76 percent premium to American Community's closing price Tuesday -- or 0.8517 Yadkin Valley shares, the companies said.
However, Rainwater said the calculation of a 76 percent premium is not "a very accurate base" as American Community shares were trading just around its tangible book value, surprising for a bank with very low non performing assets compared to the overall industry and a strong capital base.
"It could be a 10 percent or 15 percent premium in normal circumstances," the analyst said.
About 19.5 percent of the deal value will be paid in cash and the remainder will be paid in Yadkin's stock. The companies said cash will also be paid in lieu of fractional shares.
As most of the deal will take place in stock, funding the cash payouts should not be a concern for Yadkin, as it can raise the money by issuing trust preferred securities and other actions, Rainwater said.
American Community Bancshares is the holding company for American Community Bank, which caters to individuals and small- to mid-sized businesses through about a dozen branches in North and South Carolina.
The deal is expected to save $4.0 million by the end of 2009 for Elkin, North Carolina-based Yadkin, and will make it a $2 billion bank with more than 40 offices in 16 counties, Bill Long, chief executive of Yadkin said in a statement.
"We believe the transaction will be non-dilutive to Yadkin Valley Financials' earnings per share in the first year of combined operations and accretive thereafter," Long said.
Although Yadkin will have to take a few related charges in the coming quarters, it should remain "well capitalized" as American Community itself has a strong capital base, analyst Rainwater said.
The analyst said he was reviewing his "neutral" rating on both stocks and price target of $17 and $7.50 on the shares of Yadkin and American Community, respectively.
After the completion of the deal, American Community will operate in Yadkin's market as American Community Bank, a division of Yadkin Valley.
According to a regulatory filing, Yadkin expects the transaction, which includes a termination fee of about $4 million, to close in the fourth quarter.
Shares of Charlotte, North Carolina based American community were trading up $3.45 at $10.45 Wednesday. They earlier touched a high of $11.25. The stock was the top percentage gainer on Nasdaq.
Yadkin shares, which touched a low of $12.10 earlier in the day, were down $4.24 at $12.75.
(Editing by Amitha Rajan)
