Cadence finds a new merger partner

STARKVILLE – While the details haven’t been revealed, Cadence Bank announced Wednesday that it had found a new suitor just two weeks after proclaiming it had found the perfect fit.
Cadence officials said that they had terminated an earlier merger agreement with Jackson-based Trustmark, agreeing instead to be acquired by Community Bancorp of Houston, Texas.
“It’s been a pretty hectic few weeks,” said Cadence Chairman and CEO Lewis Mallory Jr.
The board of directors for Cadence Financial Corp., the parent of Cadence Bank, voted unanimously Tuesday to accept Community Bancorp’s $2.50 per share cash offer, trumping Trustmark’s $2 per share stock swap on Sept. 21.
Once the approximately 3,500 Cadence shareholders are paid, Cadence shares will no longer be traded publicly and the bank becomes a private, wholly owned subsidiary of Community Bancorp.
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. Trustmark had offered $30 million.
Mallory said four factors led to Cadence’s switch to CBC: price, jobs, name and charter.
“The cash price per share represents a premium to our current trading price and represents a higher, more certain price than what had been previously offered,” he said.
“We are excited about the opportunity to join with CBC to continue our operations under the Cadence Bank name and the Cadence charter while continuing to serve our communities with our existing employee team.”
But exiting the Trustmark deal didn’t come without a cost. Cadence paid a $2 million termination fee.
Trustmark Chairman and CEO Richard G. Hickson said Trustmark would move on.
“While we are disappointed with the decision of Cadence, we are determined to remain disciplined in our approach to acquisitions,” he said. “Trustmark will continue to evaluate opportunities that meet our strategic and financial acquisition objectives and are beneficial to our shareholders.”
Melanie Morgan, Trustmark’s director of corporate relations, said her company was “well along the process” of merging Cadence’s operations, having communicated with employees and begun their transition to Trustmark.
“So we were surprised and disappointed” by Cadence’s announcement, she said.
She declined to comment whether or not Trustmark planned to offer a more lucrative deal for Cadence, or if it planned any legal challenges.
“We’re looking at all our options,” she said. “However, we haven’t stopped looking at other opportunities, and we didn’t stop during this process.”
The Cadence-Community Bancorp deal is a startling turnaround from two weeks ago, when both Cadence and Trustmark officials said their merger was a combination of two companies with similar traits.
In fact, Mallory said at the time, “In looking for the best possible strategic capital alternatives, we felt that Trustmark was the best alternative. I don’t know of any two banking institutions … that share common cultures any more than us.”
But somewhere along the way, something happened that changed Cadence’s view.
However, neither Mallory nor CBC President and CEO Paul B. Murphy Jr. wanted to discuss the particulars of the merger. Instead, they said the details would be revealed in a proxy statement within a few weeks.
But Mallory and Murphy do have ties. They are Mississippi State University graduates, and both serve on the board of the university’s foundation.
“It never hurts to share common bonds,” Mallory said.
Community Bancorp is a bank holding company that was formed earlier this year by Murphy, who was CEO and president of Amergy Bank of Texas, and several partners.
It was created to invest in troubled banks, and Murphy said that Cadence will be its first acquisition once the deal is complete in the first quarter of next year.
“We will invest in Cadence,” Murphy said. “We’ll be providing $150 million to $250 million in new capital.”
CBC, which has raised about $900 million, is run by an experienced group, including former JPMorgan Chase Chairman and CEO William B. Harrison, former Wachovia President and CEO Robert Steel and former KKR partner Marc Shapiro.
“They are the bluest of blue chips,” Mallory said.
CBC will continue to be headquartered in Houston, while Cadence will be a subsidiary of the company, maintaining its headquarters in Starkville.
“The management and leadership will stay in place,” Murphy said.
The agreement – which must still meet regulatory and shareholder approval – also removes uncertainty for some Cadence employees, who might have lost their jobs in a Trustmark takeover.
“Cadence will continue to retain employees and anticipates needing more talented employees as we move forward,” the bank said in a statement.
Besides a better offer for shareholders, keeping its employees and retaining its name, Mallory said the CBC deal also allows Cadence to continue being actively involved in the communities it serves.
“I think you’ll be pleased with the results,” he said.
Cadence shares on Wednesday jumped 22 percent, or 46 cents, to close at $2.54. Trustmark shares fell 36 cents, or 1.6 percent, to close at $21.97.
Contact Dennis Seid at (662) 678-1578 or dennis.seid@djournal.com.

Dennis Seid/NEMS Daily Journal