Texas Capital Bancshares to merge with Independent Bank Group

(Reuters) - Texas Capital Bancshares TCBI.O and Independent Bank Group Inc IBTX.O said on Monday they would combine in a transaction structured as a merger of equals, creating the second-largest lender by assets headquartered in the Lone Star state.

U.S. regional banks have been coming together as they seek scale to reduce costs and share the burden of investing in new technology. The return of interest-rate reductions in 2019 also puts pressure on banks’ profitability, as they can’t charge as much to lend money.

The combined company will have about $48 billion in assets and $39 billion in deposits, with legacy Texas Capital shareholders controlling 55% of the new bank, according to a joint statement.

The deal will see Texas Capital shareholders receive 1.0311 shares of Independent Bank Group for each share they currently own, a 5.5% premium to Texas Capital’s Friday close.

Based on current market prices, the new lender - which will be led by David Brooks, chief executive officer of Independent Bank Group, will have a market value of around $5.5 billion.

Deals structured as mergers of equals have been prevalent this year as a way to combine institutions without one having to offer a substantial premium to the other, something which hasn’t been welcomed by shareholders of the acquirer.

BB&T Corp and SunTrust Banks Inc used the format to combine in the largest U.S. bank tie-up since the financial crisis to become Truist Financial TFC.N, while TCF Financial Corp TCF.O and Chemical Financial Corp and First Horizon National Corp FHN.N and IBERIABANK IBKC.O also were mergers of equals.

The Texas Capital and Independent Bank Group transaction is expected to close in the middle of 2020, subject to shareholder and regulatory approvals.

Combining will add 26% to Independent Bank Group’s earnings per share and 14% to Texas Capital’s EPS by the first full year after the transaction closes, the companies’ statement said.

Jefferies and Goldman Sachs & Co are financial advisers to Texas Capital, with Sullivan & Cromwell LLP acting as its legal advisor. Keefe, Bruyette & Woods advised Independent Bank, with Wachtell, Lipton, Rosen & Katz serving as legal counsel.

Reporting by C Nivedita in Bengaluru and David French in New York; Editing by Shinjini Ganguli and Anil D’Silva