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Pandemic changes merger math for bank bought by Enterprise Financial

Pandemic changes merger math for bank bought by Enterprise Financial

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Enterprise Financial Services started acquisition talks with San Diego's Seacoast Commerce Bank 17 months before it sealed a deal in August.

Enterprise ended up paying 12% less than it was willing to offer last year, but giving up more of its own shares, largely because of the damage the coronavirus pandemic did to the banking industry. The banks reported details of their merger negotiations this month in a filing with the Securities and Exchange Commission.

After Seacoast put itself up for sale in February 2019, Enterprise said in March that it would be willing to pay between $18.83 and $19.32 a share in cash and stock, or between $176 and $180 million.

At the time, Seacoast had received two higher bids, one from a financial buyer willing to pay $25 a share and one from another bank for $21.29 a share. Seacoast's board  rejected all three offers.

By February of this year, it reopened talks with potential buyers, including Enterprise. By now, Enterprise was proposing an all-stock transaction at just $13.46 a share. By March, Seacoast's investment bankers told it that market conditions were "deteriorating at a rapid pace."

After taking a break in April when both banks were busy making Paycheck Protection Program loans, talks resumed in May.

Enterprise raised its offer twice, eventually settling on $15.80 a share. The total value of $156 million is more than $20 million below Enterprise's initial offer, although Enterprise will give up more of its own shares to reach that price.

The difference is that both banks' share prices sank in the wake of the coronavirus pandemic. So, after rejecting Enterprise's bid as too low in 2019, Seacoast settled for less in 2020.

The deal will give Clayton-based Enterprise five branches in San Diego and Las Vegas to go with its Enterprise Bank & Trust operations in St. Louis, Kansas City, Phoenix and Albuquerque. Enterprise's assets will grow to $9.7 billion.

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