Old Second Bancorp, Inc. (Nasdaq: OSBC) (“Old Second”) and West Suburban Bancorp, Inc. (“West Suburban”) jointly announced today the signing of a definitive merger agreement for Old Second to acquire West Suburban in a cash and stock transaction.
Under the terms of the merger agreement, which was unanimously approved by the Boards of Directors of both companies, West Suburban shareholders will receive 42.413 shares of Old Second common stock and $271.15 in cash for each share of West Suburban common stock, for total consideration consisting of approximately 65% stock and 35% cash. Based on the closing price of Old Second common stock of $11.76 per share on July 23, 2021, the implied purchase price is $769.93 per share, with an aggregate transaction value of approximately $297 million.
Kevin Acker, Chairman of West Suburban Bancorp, Inc., stated, “West Suburban has served its customers and communities for nearly 60 years. I could not be more proud of our team, the bank we built together and the positive impact we’ve made in the western suburbs of Chicago. Much like West Suburban, Old Second has a long history of supporting its communities and for over 150 years has helped individuals and businesses in Chicago and the western suburbs through a relationship-banking model. We expect that the community bank culture and values that we share with Old Second, and the expanded products and capabilities that we will have following our merger will enhance our ability to provide exceptional banking services to all of our customers. We truly believe this combination will bring out the best in both of our companies and create a better bank for our employees as well as the customers and communities we serve.”
“We are extremely pleased to announce the combination with West Suburban,” commented James Eccher, President and Chief Executive Officer of Old Second Bancorp. “West Suburban is a franchise we have known and respected for a very long time. It has built an impeccable reputation by providing first class service to its customers and communities. This combination is expected to significantly enhance our financial strength, our position in Chicago and our ability to invest in building the best bank for our customers and communities. Given our overlapping core principles and our complementary product and service offerings, we believe this merger creates the most compelling path forward for the shareholders of both institutions. From our perspective, we do not believe there is another partner who could deliver us the same level of complementary geographic reach, scale on current products and services, upside and long-term shareholder value.”
Strategically Compelling Merger
- Significantly Enhances Scale: The pro forma company will have approximately $6.2 billion in assets, $5.3 billion in deposits and $3.4 billion in loans and will create the largest community bank under $10 billion in assets in the Chicago market. Together, the combined company will have exceptional strategic positioning with the scale to compete and prioritize investments in technology and growth.
- Creates Premier Deposit Franchise: The combination will create a low cost, core deposit franchise with 70+ branches across the Chicagoland area, strong retail deposit concentration and top-quartile deposit beta.
- Provides Platform for Growth: The pro forma company will have meaningful excess liquidity and pro forma capital generating capacity to fund growth and capitalize on a rising rate environment.
Financially Attractive Merger
- Delivers Value for Shareholders: The merger is expected to deliver ~38% EPS accretion to Old Second shareholders when including expected cost savings on a fully phased-in basis.
- Improves Profitability: On a pro forma basis, the combined company will deliver improved returns with an expected increase in return on assets of over 20 bps and an increase in return on tangible common equity of over 500 bps when including expected cost savings in a fully phased-in basis.
- Excess Capital Deployment: The acquisition will provide Old Second with the opportunity to deploy existing excess capital at a 20%+ internal rate of return, while continuing to maintain strong capital ratios.
Timing and Approvals
The merger is expected to close in the fourth quarter of 2021, subject to satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by the shareholders of each company.
Advisors
Citigroup Global Markets Inc. acted as financial advisor to Old Second and rendered a fairness opinion to its board of directors. Nelson Mullins Riley & Scarborough LLP served as legal counsel to Old Second.
Keefe, Bruyette & Woods, A Stifel Company, acted as financial advisor to West Suburban and rendered a fairness opinion to its board of directors. Kirkland & Ellis LLP, lead counsel, and Barack Ferrazzano served as legal counsel to West Suburban.
