AUB.NYSEAtlantic Union Bankshares CORP

425: Atlantic Union and Sandy Spring Address Shareholder Lawsuits, Update Merger Details

Sentiment:

Form 8-K

📋All filings for Atlantic Union Bankshares CORP
🔒Login to Follow

Atlantic Union Bankshares Corporation and Sandy Spring Bancorp are supplementing their joint proxy statement/prospectus related to their merger agreement following shareholder lawsuits and demand letters, while reaffirming their belief that the claims are without merit.

Capital raiseAtlantic Union initially offered an exchange ratio of 0.85 shares of Atlantic Union common stock for each share of Sandy Spring common stock, which represented an implied premium of 3.00% to the price of Sandy Spring common stock, based on the closing stock prices of Atlantic Union common stock and Sandy Spring common stock on September 5, 2024, and that the transaction was expected to be accompanied by an offering of approximately $400 million of Atlantic Union common stock and the sale of approximately $2 billion of commercial real estate loans after completion of the proposed transaction.Atlantic Union sent to Sandy Spring a draft LOI, subject to approval of the Executive Committee of the Atlantic Union board, which contemplated an all-stock merger in which Sandy Spring would merge with Atlantic Union and Sandy Spring stockholders would receive shares of Atlantic Union common stock at a fixed exchange ratio of 0.900 shares of Atlantic Union common stock per share of Sandy Spring common stock, which represented an implied premium of 14.2% to the price of Sandy Spring common stock, based on the closing stock prices of Atlantic Union common stock and Sandy Spring common stock on September 3, 2024, which was the day prior to the Published Article regarding a potential transaction, and an implied premium of 10.2% to the price of Sandy Spring common stock, based on the closing prices of Atlantic Union common stock and Sandy Spring common stock on September 9, 2024.The proposed LOI indicated that Atlantic Union intended to raise approximately $400 million of capital concurrent with the announcement of the transaction and that Atlantic Union anticipated selling approximately $2 billion of commercial real estate loans following completion of the transaction to reduce the combined companys commercial real estate loan concentration and improve the combined companys loan-to-deposit ratio and liquidity profile.Representatives of Morgan Stanley also discussed certain preliminary financial information with the Atlantic Union board and reviewed with the Atlantic Union board certain potential capital-raise structures, including the entrance into a forward sale agreement to raise equity capital through a registered offering of equity concurrently with the potential entry into a merger agreement with Sandy Spring.The Atlantic Union board discussed the financial impacts of such a transaction, as well as the risks and benefits associated with it, and, following such discussion, approved the entry into a proposed registered offering of equity and entrance into one or more forward sale agreements (together, the forward sale transaction), subject to the approval of a committee of the Atlantic Union board (the Pricing Committee).

Summary

  • Atlantic Union Bankshares Corporation and Sandy Spring Bancorp are supplementing their joint proxy statement/prospectus related to their merger agreement.
  • This action follows the filing of lawsuits by purported shareholders of Atlantic Union and demand letters received by Sandy Spring.
  • The lawsuits and demand letters allege false and misleading statements in the registration statement and breaches of fiduciary duty.
  • Both Atlantic Union and Sandy Spring deny the allegations but are supplementing the disclosures to avoid potential delays to the merger and minimize costs associated with litigation.
  • The supplemental disclosures provide additional details regarding the background of the merger, including discussions with other potential merger partners, the involvement of financial advisors, and the financial analysis conducted.
  • The supplemental information includes updates to the selected companies analysis and precedent transactions analysis used by the financial advisors.
  • The document also reiterates cautionary statements regarding forward-looking information and provides information on where to find additional details about the transaction.

Sentiment

Score: 6

Explanation: The sentiment is neutral. While the companies are facing legal challenges, they are taking steps to address them. The merger is still expected to proceed, and there are potential financial benefits.

Positives

  • The companies are proactively addressing legal challenges to minimize disruption to the merger.
  • The supplemental disclosures provide greater transparency regarding the merger process and financial analysis.
  • The merger is projected to be accretive to Atlantic Union's earnings per share in 2025 and 2026.

Negatives

  • Shareholder lawsuits and demand letters indicate potential concerns about the merger disclosures.
  • The merger is projected to be dilutive to Atlantic Union's tangible book value per share at closing assumed as of June 30, 2025 by 8.2%.
  • The analysis indicated that, pro forma for the merger and the Atlantic Union share issuance and the CRE loan portfolio sale, each of Atlantic Unions tangible common equity to tangible assets ratio, Tier 1 Leverage Ratio, Common Equity Tier 1 Ratio and Tier 1 Capital Ratio at closing assumed as of June 30, 2025 could be lower.

Risks

  • The outcome of legal proceedings could adversely affect the merger.
  • Failure to obtain necessary regulatory approvals could prevent the merger from closing.
  • The anticipated benefits of the merger may not be realized.
  • Integration of the two companies may be more difficult, time-consuming, or costly than expected.
  • Adverse reactions from customers or changes to business or employee relationships could occur.
  • Changes in economic, political, and market conditions could impact the merger's success.

Future Outlook

The document contains forward-looking statements regarding the expected impact of the proposed transaction on the combined company's future financial performance, the timing of the closing of the proposed transaction, and the ability to successfully integrate the combined businesses, all of which are subject to risks and uncertainties.

Management Comments

  • Atlantic Union and Sandy Spring believe that the claims asserted in the Matters are without merit and that supplemental disclosures are not required or necessary under applicable laws.
  • Atlantic Union, Sandy Spring and the other named defendants deny that they have violated any laws or breached any fiduciary duties.

Industry Context

The announcement reflects the ongoing consolidation trend in the banking industry, with institutions seeking to enhance scale, diversity, and capabilities in key markets. The merger aims to create a stronger regional bank better positioned to compete with larger players.

Comparison to Industry Standards

  • The document references precedent transactions with transaction values greater than $1.0 billion, excluding mergers of equals, to provide context for the financial terms of the proposed merger.
  • The selected transactions analysis includes metrics such as Price/Forward EPS, Price/TBV, and core deposit premium, which are common benchmarks used in evaluating bank mergers.
  • The document compares Atlantic Union and Sandy Spring to 15 selected major exchange-traded banks headquartered in the Mid-Atlantic region of the United States or Virginia, West Virginia, North Carolina, South Carolina or Georgia with total assets between $10 billion and $35 billion.

Legal Proceedings

  • Delman v. Agee, et al., Connecticut Superior Court, Judicial District of Bridgeport, Docket No. FBT-CV25-6142122-S (January 10, 2025).
  • Miller v. Atlantic Union Bankshares Corporation, et. al., Supreme Court of the State of New York, County of New York, Index No. 650230/2025 (January 14, 2025).
  • Jones v. Atlantic Union Bankshares Corporation, et. al., Supreme Court of the State of New York, County of New York, Index No. 650262/2025 (January 16, 2025).

Stakeholder Impact

  • Shareholders of Atlantic Union and stockholders of Sandy Spring will be impacted by the merger.
  • Customers of both banks may experience changes as a result of the integration.
  • Employees of both banks may be affected by potential restructuring or job changes.

Next Steps

  • Atlantic Union and Sandy Spring will continue to seek regulatory approvals for the merger.
  • Shareholders of Atlantic Union and stockholders of Sandy Spring will vote on the proposed transaction.
  • The companies will work to complete the merger and integrate their operations.

Key Dates

DateDescription
January 1, 2020Start date for precedent transactions analysis.
December 13, 2020Huntington Bancshares Inc. and TCF Financial Corp. merger announcement date.
February 3, 2020Pacific Premier Bancorp, Inc. and Opus Bank merger announcement date.
February 22, 2021M&T Bank Corporation and Peoples United Financial, Inc. merger announcement date.
April 22, 2021Independent Bank Corp. and Meridian Bancorp, Inc. merger announcement date.
April 26, 2021New York Community Bancorp, Inc. and Flagstar Bancorp, Inc. merger announcement date.
July 28, 2021Citizens Financial Group, Inc. and Investors Bancorp, Inc. merger announcement date.
September 16, 2021First Interstate Bank BancSystem, Inc. and Great Western Bancorp, Inc merger announcement date.
September 21, 2021U.S. Bancorp and MUFG Union Bank, N.A merger announcement date.
September 23, 2021Valley National Bancorp and Bank Leumi le-Israel Corporation merger announcement date.
October 12, 2021Columbia Financial, Inc. and Umpqua Holdings Corporation merger announcement date.
December 20, 2021BMO Financial Group and Bank of the West merger announcement date.
September 27, 2022Provident Financial Services, Inc. and Lakeland Bancorp, Inc. merger announcement date.
February 20, 2024Sandy Spring's Form 10-K filing for fiscal year ended December 31, 2023.
February 22, 2024Atlantic Union's Form 10-K filing for fiscal year ended December 31, 2023.
March 26, 2024Atlantic Union's definitive proxy statement relating to its 2024 annual meeting of shareholders was filed with the SEC.
April 10, 2024Sandy Spring's definitive proxy statement in connection with its 2024 Annual Meeting of Stockholders was filed with the SEC.
April 22, 2024Independent Bank Corp. and Meridian Bancorp, Inc. merger announcement date.
April 29, 2024UMB Financial Corporation and Heartland Financial, USA Inc. merger announcement date.
May 7, 2024Atlantic Union board held a regular meeting to discuss potential acquisition targets, including Sandy Spring.
May 20, 2024SouthState Corporation and Independent Bank Group, Inc. merger announcement date.
June 25, 2024Mr. Asbury updated the Atlantic Union board on the current M&A landscape.
June 30, 2025Closing balance sheet estimates assumed as of June 30, 2025 for Atlantic Union and Sandy Spring taken from publicly available consensus street estimates.
July 29, 2024Renasant Corporation and The First Bancshares, Inc. merger announcement date.
July 31, 2024Sandy Spring board held a regular meeting to discuss strategic alternatives, including a potential merger with Atlantic Union.
August 13, 2024Executive Committee of the Atlantic Union board held a special meeting to discuss a potential business combination with Sandy Spring.
September 3, 2024Date used to calculate implied premium in initial LOI.
September 5, 2024Date used to calculate implied premium in initial LOI.
September 6, 2024Atlantic Union management met with Morgan Stanley to discuss the exchange ratio for the LOI.
September 9, 2024Atlantic Union sent a draft LOI to Sandy Spring.
September 16, 2021First Interstate Bank BancSystem, Inc. and Great Western Bancorp, Inc merger announcement date.
September 20, 2024Atlantic Union board reviewed the proposed transaction with Morgan Stanley.
September 21, 2021U.S. Bancorp and MUFG Union Bank, N.A merger announcement date.
September 23, 2021Valley National Bancorp and Bank Leumi le-Israel Corporation merger announcement date.
October 16, 2024Atlantic Union board held a special meeting to receive updates on the proposed transaction.
October 18, 2024Date used for implied value per share of Sandy Spring common stock in precedent transactions analysis.
October 20, 2024Date of Morgan Stanley's fairness opinion.
October 21, 2024Date of the original Merger Agreement between Atlantic Union and Sandy Spring.
November 16, 2020PNC Financial Services Group, Inc. and BBVA USA Bancshares, Inc. merger announcement date.
November 21, 2024Atlantic Union filed a registration statement on Form S-4 with the SEC.
December 4, 2024Sandy Spring received demand letters from counsel representing individual purported stockholders of Sandy Spring.
December 13, 2024Amendment to the registration statement on Form S-4.
December 17, 2024SEC declared the registration statement effective and Atlantic Union filed a definitive joint proxy statement/prospectus.
December 18, 2024Atlantic Union and Sandy Spring first mailed the joint proxy statement/prospectus to their respective shareholders or stockholders.
January 10, 2025Date of the Delman v. Agee, et al. lawsuit filing.
January 14, 2025Date of the Miller v. Atlantic Union Bankshares Corporation, et. al. lawsuit filing.
January 16, 2025Date of the Jones v. Atlantic Union Bankshares Corporation, et. al. lawsuit filing.
January 23, 2025Date used to estimate the aggregate merger consideration by KBW.
January 24, 2025Date of the current report on Form 8-K.

Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.