SCHEDULE: Canyon Partners Backs First Foundation Merger

Canyon Partners, a significant shareholder in First Foundation Inc., has committed to voting its 9.9% stake in favor of the company's merger with FirstSun Capital Bancorp.

Summary

• Canyon Capital Advisors LLC, Joshua S. Friedman, and Mitchell R. Julis (Reporting Persons) beneficially own 8,152,392 shares of First Foundation Inc. Common Stock, representing 9.9% of the class.
• The Reporting Persons are filing a Schedule 13D to supersede a previous Schedule 13G due to entering into a Support Agreement related to First Foundation's merger with FirstSun Capital Bancorp.
• Under the Support Agreement, the Accounts (managed by Reporting Persons) have agreed to vote their shares in favor of the merger and against any competing proposals.
• The Accounts also agreed not to sell or transfer their shares for a period, with certain exceptions.
• The total cost to acquire the reported Common Stock was approximately $34,725,270, funded by working capital and margin borrowings.
• Previous investments in July 2024 included 3,206,392 common shares at $4.10/share, preferred stock, and warrants, totaling approximately $46 million.
• Sam Edelson, a designee of the Accounts, was appointed to First Foundation's Board of Directors on September 3, 2024.
• Several agreements (Investment Agreement, Registration Rights Agreement, Partial Termination Agreement, Warrant Exercise and Termination Agreement) govern the relationship and will be impacted by the merger.
• The Series B Preferred Stock held by the Accounts converted into common stock on October 2, 2024, following shareholder approval to increase authorized common shares.
• The Series C Warrants will be exercised on a cashless basis immediately prior to the merger's effective time.

Sentiment

Score: 8

Explanation: The filing indicates strong support from a major shareholder for a strategic merger, which is generally a positive signal for the transaction's completion and potential future value creation. The detailed agreements show a clear path forward for the investor's holdings within the context of the merger.

Positives

• Major shareholder (Canyon Partners) has publicly committed to supporting the merger with FirstSun Capital Bancorp, increasing the likelihood of its approval.
• Canyon Partners has a representative, Sam Edelson, on First Foundation's Board of Directors, indicating alignment with strategic decisions.
• The company successfully completed a capital raise in July 2024, with Canyon Partners as a key investor, injecting approximately $46 million.

Negatives

• No explicit negatives are presented from the perspective of the Reporting Persons or the Issuer in this filing, which primarily details a strategic alignment for a merger.

Risks

• The merger with FirstSun Capital Bancorp may not close, which would terminate the Support Agreement and other related agreements.
• The Reporting Persons are restricted from selling or transferring their shares for a period, subject to certain exceptions, which limits their liquidity.
• The Reporting Persons are obligated to vote against any alternative acquisition proposals, potentially limiting the Issuer's ability to pursue a higher offer if one emerges.

Future Outlook

The Reporting Persons intend to review their investment in First Foundation Inc. on an ongoing basis. They may engage in discussions with management, the Board, and other stakeholders regarding the Issuer's business, operations, governance, and strategic alternatives, including potential transactions to enhance shareholder value. Depending on various factors, they may acquire additional securities or dispose of existing holdings, or pursue other plans to increase shareholder value. The Support Agreement commits them to vote in favor of the merger, and upon closing, new registration rights will be granted by FirstSun Capital Bancorp.

Industry Context

This filing reflects a significant step in the ongoing consolidation trend within the financial services and banking industry. The commitment of a major institutional investor like Canyon Partners to support a merger indicates a strategic move towards creating a larger, potentially more competitive entity, which is a common driver for M&A activity in the sector.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Related Party Transactions

• The Investment Agreement, Support Agreement, Registration Rights Agreement, Partial Termination Agreement, and Warrant Exercise and Termination Agreement are all between First Foundation Inc. and affiliates of Canyon Partners, LLC, who are significant shareholders and have board representation.
• The appointment of Sam Edelson to the Board of Directors as a designee of Canyon Partners.

Stakeholder Impact

• Shareholders: The merger, supported by a major investor, will lead to a change in ownership and potentially a new strategic direction. Those holding preferred stock and warrants will see their holdings converted or exercised in connection with the merger.
• Employees: A merger typically involves integration and potential restructuring, which could impact employees of First Foundation Inc.
• Customers: The merger could lead to changes in banking services, product offerings, or branch networks as First Foundation integrates with FirstSun Capital Bancorp.
• Creditors: The financial structure and creditworthiness of the combined entity may change post-merger.

Next Steps

• Closing of the merger between First Foundation Inc. and FirstSun Capital Bancorp.
• Cashless exercise of Series C Warrants by the Accounts immediately prior to the merger's effective time.
• Granting of new registration rights to the Accounts by FirstSun Capital Bancorp upon the closing of the merger.
• Potential ongoing discussions between Reporting Persons and First Foundation's management/Board regarding strategic direction and shareholder value.

Key Dates

Recommendation

The filing details a major shareholder's commitment to a pending merger, indicating a strategic alignment that supports the transaction's completion. While not a direct financial performance report, the strong institutional backing for the merger suggests stability and a clear path forward for the company's strategic direction. Investors should hold their position pending the completion of the merger and the realization of its terms.

Keywords

First Foundation Inc., FirstSun Capital Bancorp, Canyon Partners, Merger, Schedule 13D, Shareholder Support, Investment Agreement, Corporate Governance, Financial Services, Banking