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

First Busey Corporation and CrossFirst Bankshares are supplementing their joint proxy statement/prospectus due to lawsuits and demand letters from purported stockholders, despite believing the claims are without merit.

Summary

• First Busey Corporation and CrossFirst Bankshares are proceeding with their planned merger, initially announced on August 26, 2024.
• The merger involves CrossFirst merging into Busey, with Busey as the surviving entity, and CrossFirst Bank merging into Busey Bank.
• The SEC declared the registration statement for the merger effective on November 13, 2024.
• Following the filing of the joint proxy statement/prospectus, two lawsuits and demand letters were received from purported stockholders of CrossFirst and Busey.
• These lawsuits and demand letters allege that the registration statement was false and misleading, and that the defendants breached their fiduciary duties.
• To avoid delays and minimize costs, Busey and CrossFirst are supplementing the joint proxy statement/prospectus with additional disclosures, 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 accretive to Busey's 2026 EPS by 16.2% but dilutive to Busey's tangible book value per share at closing by 0.6%, assumed as of March 31, 2025.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to the lawsuits and the need for supplemental disclosures, but the companies are moving forward with the merger as planned. The expected accretion is a positive, but the dilution is a negative.

Positives

• The merger is expected to be accretive to Busey's 2026 EPS by 16.2%.
• The companies are proactively addressing legal challenges to ensure the merger proceeds smoothly.

Negatives

• Two lawsuits and demand letters have been filed by purported stockholders, alleging a false and misleading registration statement and breach of fiduciary duties.
• The merger is expected to dilute Busey's tangible book value per share by 0.6% at closing, assumed as of March 31, 2025.
• The companies are incurring costs and risks associated with litigation.

Risks

• The lawsuits and demand letters could potentially delay or adversely affect the merger.
• There is a risk that the anticipated benefits of the merger may not be fully realized.
• The integration of the two companies could be more difficult, time-consuming, or costly than expected.
• The merger could lead to dilution of Busey's tangible book value per share.
• There are risks related to changes in interest rates, economic conditions, and regulatory environments.
• The companies face risks related to cybersecurity, technology, and the loss of key personnel.

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

• 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

This announcement reflects the ongoing trend of consolidation in the banking industry, where companies seek to achieve economies of scale and expand their market presence through mergers and acquisitions. The legal challenges highlight the scrutiny such transactions face from shareholders.

Comparison to Industry Standards

• The document provides comparable company analysis for both Busey and CrossFirst, including stock price-to-tangible book value per share multiples and stock price-to-estimated EPS 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.
• 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.
• 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.
• 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.
• 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.
• 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.
• 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.
• The low and high pay-to-trade ratios of the selected transactions were 0.62x and 1.00x, respectively.
• The low and high price per common share to LTM EPS of the selected transactions were 6.5x and 16.4x, respectively.
• The low and high core deposit premiums of the selected transactions were -0.5% and 15.6%, respectively.
• For the eight (8) 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.
• For the eight (8) selected transactions in which the acquired company was publicly traded, the low and high one (1)-day market premiums of the selected transactions (excluding the impact of the one (1)-day market premium of one of the selected transactions, which premium was considered not meaningful because it was greater than 40.0%) were 2.1% and 33.1%, respectively.

Legal Proceedings

• Two lawsuits have been filed against CrossFirst, its board members, and Busey by purported stockholders.
• Demand letters have been received from counsel representing other purported stockholders.
• The lawsuits and demand letters allege a false and misleading registration statement, breach of fiduciary duties, and negligence.

Stakeholder Impact

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

Next Steps

• The companies will continue to work towards closing the merger.
• Busey and CrossFirst will address the lawsuits and demand letters.
• The companies will seek the necessary regulatory and stockholder approvals.

Key Dates

Keywords

merger, lawsuits, proxy statement, accretion, dilution, financial analysis, banking, CrossFirst, Busey, stockholders