Cadence documents show dueling offers

STARKVILLE – Cadence Bank’s acceptance – then rejection – of Trustmark National Bank’s acquisition offer earlier this month for a better offer from Community Bancorp happened during a whirlwind process that initially began in late July and involved a round of back-and-forth offers.
Details of how the deals transpired emerged from Cadence’s proxy statement released Wednesday.
Cadence announced Sept. 22 that it had reached a definitive agreement to be acquired by Jackson-based Trustmark for a $2-per-share stock swap.
But two weeks later, Cadence said it had terminated the agreement, instead going for a $2.50-per-share cash offer with Community Bancorp of Houston, Texas.
Community Bancorp, or CBC, also offered $36 million for $44 million in Cadence preferred stock owned by the U.S. Treasury and issued for the bank bailout program, or TARP. Trustmark had offered $30 million.
Unlike the Trustmark deal, the CBC offer will allow Cadence to keep its name, a key reason why Cadence was willing to pay a $2 million termination fee.
CBC advanced the money to Cadence, according to the proxy.
Unable to raise $80 million of capital through a public offering, Cadence began looking for private investors and found eight interested parties by August. It also looked for financial institutions that also might be interested in acquiring the company. Among them was Trustmark.
Both CBC and Trustmark reviewed Cadence’s operations, and from then on, negotiations ramped up:
– On Aug. 5, CBC asked for the exclusive right to negotiate an acquisition with Cadence. But CBC didn’t offer a price for such a deal and Cadence declined the request. On Aug. 24, CBC estimated an offering of 50 cents to $1.50 per share for Cadence stock.
– The next day, Cadence officials met with Trustmark CEO Richard Hickson, and Trustmark said it would offer about $3 per share.
– On Aug. 27, Cadence’s board of directors discussed both offers and authorized bank officials to negotiate and execute a letter of intent with Trustmark.
That same day, Cadence advised CBC officials to “cease their efforts with respect to their due diligence evaluation of Cadence.” CBC sent a letter urging Cadence to allow them to continue negotiations. It repeated the request on Aug. 30, asking for an on-site review of Cadence’s loan portfolio.
n On Aug. 31, Cadence entered a nonbinding letter of intent with Trustmark, with the understanding that Trustmark would offer $3 per share for Cadence common stock, as well as $17.6 million for the $44 million in TARP preferred stock.
A week later, CBC told Cadence it was still interested, offering $2 to $3.50 per share. Cadence told Trustmark of CBC’s continued interest.
– On Sept. 13, Cadence asked Trustmark if it could be involved in any discussions it had with the U.S. Treasury regarding the preferred shares. Cadence was not invited to the talks. Trustmark then told Cadence that it would reduce its offer to $2 per share after negotiating the TARP payback.
Cadence’s board asked Trustmark to reconsider the lower offer, but Trustmark said its offer was not negotiable.
– On Sept. 17, CBC told Cadence it would offer $2.50 per share in cash; at the same time, Trustmark said a “definitive agreement” had to be reached by Sept. 20 or it would “terminate” negotiations.
– On Sept. 20, Cadence’s board met to mull both offers. But because CBC had not finished its talks with the U.S. Treasury about the preferred stock, and Cadence had not received financial information from CBC, Cadence decided it was in its best interest to move ahead with the Trustmark offer. At the same time, the board discussed nixing the deal if it received a better offer and paying Trustmark a $2 million termination fee.
Despite the announced Trustmark acquisition deal with Cadence on Sept. 22, CBC continued telling Cadence it was interested. A week later, Cadence’s board met and agreed to CBC’s offer, notifying Trustmark on Sept. 30.
Trustmark told Cadence it expected it to abide by its agreement. However, on Oct. 5, Trustmark sweetened the deal, making a “best and final offer” of $2.25 a share.
but Cadence’s board considered CBC’s the superior offer and notified Trustmark the next day.
And on Oct. 6, Cadence announced it had agreed to a new agreement with CBC.
That deal must still be approved by shareholders and it also must meet regulatory approval. The first step is getting about 3,500 shareholders to agree, although a date has not been set for a vote, Cadence officials said.
Officials hope to close the deal by March 31.
If finalized, Cadence will become a privately held company and operate as a subsidiary of CBC.
The merger can be terminated at any time by either party. Under certain conditions, Cadence would have to pay as much as $4.5 million in termination fees.
Contact Dennis Seid at (662) 678-1578 or

Dennis Seid/NEMS Daily Journal

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