425: First Busey to Acquire CrossFirst in $20 Billion Merger, Expanding Regional Reach

First Busey Corporation and CrossFirst Bankshares, Inc. announced a merger agreement that will create a premier regional banking franchise with approximately $20 billion in assets.

Summary

• First Busey Corporation and CrossFirst Bankshares, Inc. have announced a definitive agreement to merge, creating a $20 billion asset institution.
• The merger aims to expand Busey's regional operating model into new markets and provide CrossFirst customers access to Busey's wealth management and payment technology solutions.
• CrossFirst shareholders will receive 0.6675 shares of Busey stock for each share of CrossFirst stock, resulting in pro forma ownership of 63.5% for Busey shareholders and 36.5% for CrossFirst shareholders.
• The transaction is expected to close in the first or second quarter of 2025, with the banks merging in mid-2025.
• Upon completion, Mike Maddox will become President and Executive Vice Chairman of First Busey and CEO of Busey Bank, while Van Dukeman will remain as Executive Chairman and CEO of the Holding Company and Executive Chairman of Busey Bank.
• One year after the bank merger, Mike Maddox will take over as CEO of the Holding Company, with Van Dukeman continuing as Executive Chairman.
• The Holding Company headquarters will be located in Leawood, Kansas, while Busey Bank's headquarters will remain in Champaign, Illinois.
• The deal is expected to result in minimal tangible book value dilution of 0.6%, 20% EPS accretion in 2026 (excluding merger-related charges), and a tangible book value earn-back period of approximately six months.
• Cost savings are estimated at approximately $25 million on a fully phased-in basis, representing around 16% of CrossFirst's annual non-interest expense base.
• No branch closures or consolidations are contemplated as part of this transaction.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the strategic rationale of the merger, the expected financial benefits, and the confidence expressed by management teams. The deal is presented as a win-win for both companies, with complementary strengths and growth opportunities.

Positives

• The merger creates a larger, more diversified financial institution with a broader regional reach.
• CrossFirst's strong loan growth and expertise in dynamic markets complement Busey's robust capital foundation and core deposit base.
• The combined company will benefit from Busey's wealth management and payment technology platform.
• The transaction is expected to be financially accretive with minimal tangible book value dilution and a short earn-back period.
• The combined leadership team is experienced and well-positioned to navigate the integration process.
• Busey's strong capital position allows it to pursue the merger without needing to raise additional capital.
• The deal is projected to have an internal rate of return north of 19%.

Negatives

• The transaction involves some tangible book value dilution, although it is expected to be minimal at 0.6%.
• There are integration risks associated with combining two organizations, although management expresses confidence in their ability to manage this process.
• The success of the merger depends on realizing the expected cost savings and revenue synergies.

Risks

• The transaction is subject to regulatory and shareholder approvals, and there is a risk that these approvals may not be obtained or may be subject to conditions that could adversely affect the combined company.
• There are risks associated with integrating the two companies, including potential difficulties in combining operations, systems, and cultures.
• The combined company will face increased competition in the financial services sector.
• Changes in interest rates and economic conditions could impact the financial performance of the combined company.
• The loss of key executives or associates could disrupt the integration process and impact the company's performance.

Future Outlook

The combined organization aims to become a leading regional banking institution throughout the Midwest and Southwestern regions of the United States, leveraging the strengths of both companies to drive growth and enhance customer service.

Management Comments

• Van Dukeman: 'We believe we found that with CrossFirst. Together, we will be able to take Busey's regional operating model into new dynamic markets with strong economies and demographics, while providing CrossFirst customers access to our wealth management and payment technology solutions products.'
• Mike Maddox: 'This combination will take CrossFirst to new heights by combining our leading and growing commercial banking franchise with the power of Busey's core deposit franchise, exceptional wealth management platform, and payment tech solutions offered by FirsTech.'
• Jeff Jones: 'This is just a great strategic fit for these two culturally aligned community and commercially focused institutions.'

Industry Context

This merger reflects a broader trend of consolidation in the banking industry, as institutions seek to gain scale, expand their geographic footprint, and enhance their product offerings to compete more effectively. The deal is notable for its focus on combining complementary strengths, with Busey bringing its deposit base and wealth management capabilities and CrossFirst contributing its loan growth and expertise in high-growth markets.

Comparison to Industry Standards

• The projected financial performance of the combined company, including minimal tangible book value dilution, a short earn-back period, and robust EPS accretion, is expected to stand out among recently announced transactions in the industry.
• The deal structure, a 100% stock transaction, is common in the current environment, as banks seek to preserve capital and avoid diluting shareholders with cash payments.
• The estimated cost savings of $25 million, representing 16% of CrossFirst's non-interest expense, is within the typical range for bank mergers of this size.
• The pro forma capital ratios of the combined company are expected to remain significantly above well-capitalized thresholds, which is a positive sign for investors and regulators.

Management Changes

Stakeholder Impact

• Shareholders of both companies are expected to benefit from the increased scale, diversification, and financial performance of the combined organization.
• Customers of both companies will have access to a broader range of products and services.
• Employees of both companies will have opportunities for career advancement within the larger organization.
• The combined organization remains committed to investing in the communities it serves.

Next Steps

• Busey will file a registration statement on Form S-4 with the SEC, including a joint proxy statement of Busey and CrossFirst.
• The companies will seek regulatory and shareholder approvals for the proposed transaction.
• The companies will work to integrate their operations, systems, and cultures following the completion of the merger.

Key Dates