8-K: CrossFirst Bankshares and First Busey Corporation Face Lawsuits Over Merger, Issue Supplemental Disclosures

CrossFirst Bankshares and First Busey Corporation are facing lawsuits from purported stockholders alleging misleading statements in their merger registration, prompting supplemental disclosures to the joint proxy statement/prospectus.

Summary

• CrossFirst Bankshares and First Busey Corporation have agreed to merge, with Busey as the surviving entity.
• Following the filing of the joint proxy statement/prospectus, two lawsuits were filed by purported CrossFirst stockholders, alleging false and misleading statements in the registration statement.
• Additionally, demand letters were received from other purported stockholders making similar allegations.
• To avoid delays and minimize costs, CrossFirst and Busey are providing supplemental disclosures to the joint proxy statement/prospectus, while denying any wrongdoing.
• The supplemental disclosures include additional details regarding the background of the merger, the financial advisor's opinion, and the financial analysis of the transaction.
• The merger is expected to be accretive to Busey's 2026 EPS by 16.2% but could be dilutive to Busey's tangible book value per share by 0.6% at closing, assumed as of March 31, 2025.

Sentiment

Score: 3

Explanation: The document reveals legal challenges and potential delays to the merger, which negatively impacts investor sentiment. While the merger is expected to be accretive, the legal issues and potential dilution create uncertainty.

Positives

• The merger is expected to be accretive to Busey's 2026 EPS by 16.2%.

Negatives

• The merger could dilute Busey's tangible book value per share by 0.6% at closing, assumed as of March 31, 2025.
• Lawsuits and demand letters have been filed alleging misleading statements in the merger registration.

Risks

• The merger could be delayed or terminated due to legal challenges or failure to obtain necessary approvals.
• The anticipated benefits of the merger may not be fully realized.
• Integration of the two companies could be more difficult, time-consuming, or costly than expected.
• The combined company may face challenges in retaining customers and key personnel.
• Changes in interest rates, economic conditions, and regulatory environment could impact the combined company's performance.
• The company is subject to risks related to cybersecurity, technology, and litigation.

Future Outlook

The document includes forward-looking statements regarding the expected timing of the merger, cost savings, synergies, and other anticipated benefits, but cautions that actual results could differ materially due to various risks and uncertainties.

Management Comments

• CrossFirst and Busey believe that the claims asserted in the Matters are without merit and supplemental disclosures are not required or necessary under applicable laws.
• CrossFirst, the other named defendants and Busey deny that they have violated any laws or breached any fiduciary duties.
• CrossFirst, the other named defendants and Busey specifically deny all allegations in the Matters and that any additional disclosure was or is required in the joint proxy statement/prospectus.

Industry Context

This merger is part of the ongoing consolidation trend in the banking industry, where smaller banks are merging to achieve economies of scale and improve competitiveness. The lawsuits and supplemental disclosures highlight the increased scrutiny and potential legal challenges that can arise during such transactions.

Comparison to Industry Standards

• The stock price-to-tangible book value multiples for CrossFirst's selected companies ranged from 0.81x to 2.64x, which is within the typical range for regional banks.
• The stock price-to-2024 estimated EPS multiples for CrossFirst's selected companies ranged from 8.7x to 19.5x, which is also within the typical range for regional banks.
• The stock price-to-tangible book value multiples for Busey's selected companies ranged from 0.92x to 3.99x, which is within the typical range for regional banks.
• The stock price-to-2024 estimated EPS multiples for Busey's selected companies ranged from 10.6x to 18.1x, which is also within the typical range for regional banks.
• The transaction price-to-tangible book value multiples of the selected transactions ranged from 0.97x to 2.02x, which is within the typical range for bank mergers.
• The pay-to-trade ratios of the selected transactions ranged from 0.62x to 1.00x, which is within the typical range for bank mergers.
• The price per common share to LTM EPS of the selected transactions ranged from 6.5x to 16.4x, which is within the typical range for bank mergers.
• The core deposit premiums of the selected transactions ranged from -0.5% to 15.6%, which is within the typical range for bank mergers.

Legal Proceedings

• Two lawsuits have been filed against CrossFirst, its board members, and Busey, alleging false and misleading statements in the merger registration.
• Demand letters have been received from other purported stockholders making similar allegations.

Stakeholder Impact

• Shareholders of CrossFirst and Busey are impacted by the merger and the legal challenges.
• Employees of both companies may experience uncertainty during the integration process.
• Customers of both banks may be affected by changes in services and operations.
• The merger could impact the competitive landscape for other financial institutions.

Next Steps

• CrossFirst and Busey will continue to defend against the lawsuits and demand letters.
• The companies will seek to obtain the necessary regulatory and stockholder approvals for the merger.
• The merger is expected to close after all conditions are met.

Key Dates

Keywords

merger, lawsuits, supplemental disclosures, proxy statement, accretive, dilutive, financial analysis, bank, stockholders, EPS, tangible book value