425: First Busey Corporation Addresses Lawsuits and Provides Supplemental Disclosures Regarding CrossFirst Merger

First Busey Corporation is supplementing its joint proxy statement/prospectus related to the merger with CrossFirst Bankshares, Inc. following two lawsuits and demand letters from purported stockholders.

Summary

• First Busey Corporation and CrossFirst Bankshares, Inc. entered into a merger agreement on August 26, 2024, where CrossFirst will merge into Busey.
• Following the filing of the joint proxy statement/prospectus, two lawsuits were filed against CrossFirst, its board members, and Busey, alleging false and misleading statements and breach of fiduciary duty.
• Additionally, demand letters were received from other purported stockholders making similar allegations.
• To avoid delays and minimize costs, Busey and CrossFirst are supplementing the joint proxy statement/prospectus, while denying any wrongdoing or legal necessity for the additional disclosures.
• The supplemental disclosures include details about the CrossFirst board's discussions regarding the merger and additional financial analysis data.
• The merger is expected to be 16.2% accretive to Busey's estimated 2026 EPS 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: 4

Explanation: The document addresses legal challenges and potential delays, which negatively impact 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%.
• The supplemental disclosures aim to avoid delays and minimize costs associated with the lawsuits.

Negatives

• Two lawsuits and demand letters have been filed by purported stockholders, alleging false and misleading statements and breach of fiduciary duty.
• The merger could be dilutive to Busey's tangible book value per share by 0.6% at closing, assumed as of March 31, 2025.

Risks

• The lawsuits and demand letters could potentially delay or adversely affect the merger.
• The merger may not close as expected due to regulatory, stockholder, or other approvals not being received.
• The integration of the two companies may be more difficult, time-consuming, or costly than expected.
• The anticipated benefits of the merger may not be realized.
• There are risks related to changes in interest rates, economic conditions, and regulatory environments.
• The company faces risks related to cybersecurity, technology, and the loss of key personnel.

Future Outlook

The document includes forward-looking statements regarding the proposed transaction, revenues, earnings, loan production, asset quality, and capital levels, but cautions that actual results could differ materially due to various risks and uncertainties.

Management Comments

• Busey and CrossFirst believe that the claims asserted in the Matters are without merit and supplemental disclosures are not required or necessary under applicable laws.
• Busey, CrossFirst and the other named defendants deny that they have violated any laws or breached any fiduciary duties.
• Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein or in the joint proxy statement/prospectus.

Industry Context

The merger is part of a broader trend of consolidation in the banking industry, where companies seek to achieve economies of scale and expand their market presence. The lawsuits and demand letters highlight the increased scrutiny and potential legal challenges that can arise during such transactions.

Comparison to Industry Standards

• The document provides detailed financial analysis including comparable company multiples and transaction multiples.
• The low and high stock price-to-tangible book value per share multiples of the selected companies in the CrossFirst Selected Companies Analysis were 0.81x and 2.64x, respectively, which is within the range of typical bank valuations.
• The low and high stock price-to-2024 estimated EPS multiples of the selected companies in the CrossFirst Selected Companies Analysis were 8.7x and 19.5x, respectively, which is within the range of typical bank valuations.
• The low and high stock price-to-2025 estimated EPS multiples of the selected companies in the CrossFirst Selected Companies Analysis were 9.0x and 18.9x, respectively, which is within the range of typical bank valuations.
• The low and high stock price-to-tangible book value per share multiples of the selected companies in the Busey Selected Companies Analysis were 0.92x and 3.99x, respectively, which is within the range of typical bank valuations.
• The low and high stock price-to-2024 estimated EPS multiples of the selected companies in the Busey Selected Companies Analysis were 10.6x and 18.1x, respectively, which is within the range of typical bank valuations.
• The low and high stock price-to-2025 estimated EPS multiples of the selected companies in the Busey Selected Companies Analysis were 10.7x and 17.9x, respectively, which is within the range of typical bank valuations.
• The low and high transaction price-to-tangible book value multiples of the selected transactions in the Selected Transactions Analysis were 0.97x and 2.02x, respectively, which is within the range of typical bank merger valuations.
• The low and high pay-to-trade ratios of the selected transactions were 0.62x and 1.00x, respectively, which is within the range of typical bank merger valuations.
• The low and high price per common share to LTM EPS of the selected transactions were 6.5x and 16.4x, respectively, which is within the range of typical bank merger valuations.
• The low and high core deposit premiums of the selected transactions were -0.5% and 15.6%, respectively, which is within the range of typical bank merger valuations.
• For the eight selected transactions in which FWD EPS for the acquired company was available at announcement, the low and high price per share to FWD EPS of the selected transactions were 6.1x and 16.1x, respectively, which is within the range of typical bank merger valuations.
• For the eight selected transactions in which the acquired company was publicly traded, the low and high one-day market premiums of the selected transactions (excluding one outlier) were 2.1% and 33.1%, respectively, which is within the range of typical bank merger valuations.

Legal Proceedings

• Two lawsuits were filed against CrossFirst, its board members, and Busey, alleging false and misleading statements and breach of fiduciary duty.
• Demand letters were received from other purported stockholders making similar allegations.

Stakeholder Impact

• Shareholders of Busey and CrossFirst are impacted by the potential delay and uncertainty surrounding the merger.
• Employees of both companies may be affected by the integration process.
• Customers of both banks may experience changes as a result of the merger.

Next Steps

• Busey and CrossFirst 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 companies will continue to work towards the completion of the merger.

Key Dates

Keywords

merger, lawsuits, proxy statement, accretive, dilutive, financial analysis, stockholders, CrossFirst, Busey, banking