8-K: FirstSun Capital Bancorp Announces Merger with HomeStreet, Inc. and $175 Million Capital Raise

FirstSun Capital Bancorp has agreed to merge with HomeStreet, Inc., in a deal that includes a $175 million capital raise.

Summary

• FirstSun Capital Bancorp will merge with HomeStreet, Inc., in a two-step process.
• HomeStreet will first merge into a subsidiary of FirstSun, then immediately merge into FirstSun.
• Following the merger, HomeStreet Bank will merge into Sunflower Bank, a subsidiary of FirstSun.
• HomeStreet shareholders will receive 0.4345 shares of FirstSun stock for each share of HomeStreet stock they own.
• The merger is expected to close in mid-2024, pending regulatory and shareholder approvals.
• FirstSun will raise $175 million through the sale of its common stock to institutional investors.
• Wellington Management will purchase $80 million of FirstSun stock upfront and $95 million will be raised at the closing of the merger.
• FirstSun will issue warrants to Wellington Management to purchase approximately 1.15 million shares of FirstSun stock at an exercise price of $32.50 per share.
• Three members of HomeStreet's board will join the board of the combined entity, including Mark Mason as Executive Vice Chairman.
• Three members of HomeStreet Bank's board will join the board of the surviving bank, including Mark Mason.

Sentiment

Score: 7

Explanation: The document is generally positive, outlining a strategic merger and capital raise. While there are risks, the overall tone is optimistic about the future of the combined entity.

Positives

• The merger will create a larger, more diversified financial institution.
• The capital raise will strengthen FirstSun's balance sheet.
• The addition of HomeStreet's board members will bring valuable experience to the combined entity.
• The combined bank will continue to operate the assumed branches of HomeStreet Bank under the HomeStreet Bank name and brand.

Negatives

• The merger is subject to regulatory and shareholder approvals, which could delay or prevent the deal from closing.
• The merger agreement includes a $10 million termination fee payable by either FirstSun or HomeStreet under certain circumstances.
• The merger will result in the cancellation of HomeStreet stock and the issuance of FirstSun stock, which may have tax implications for HomeStreet shareholders.

Risks

• The merger may not be completed if regulatory or shareholder approvals are not obtained.
• The integration of the two companies may be more difficult or costly than expected.
• The expected cost savings and synergies from the merger may not be realized.
• There is a risk of unexpected delays in closing the merger.
• The merger agreement includes a $10 million termination fee payable by either FirstSun or HomeStreet under certain circumstances.

Future Outlook

The parties anticipate that the Mergers and the accompanying Investments will close in mid-2024, subject to regulatory and shareholder approvals and satisfaction or waiver of other closing conditions.

Management Comments

• The Merger Agreement was unanimously approved by the Boards of Directors of each of FirstSun and HomeStreet.

Industry Context

This merger reflects a trend of consolidation in the banking industry, as smaller banks seek to gain scale and efficiency.

Comparison to Industry Standards

• The exchange ratio of 0.4345 shares of FirstSun stock for each share of HomeStreet stock is within the typical range for bank mergers of this size.
• The $175 million capital raise is a significant amount, but is not unusual for a merger of this scale.
• The inclusion of board members from the acquired company is a common practice in mergers to ensure a smooth transition and integration.
• The three year term of the warrants is a standard term for warrants issued in connection with a capital raise.

Management Changes

Corporate Governance

Stakeholder Impact

• HomeStreet shareholders will receive FirstSun stock, potentially impacting their investment value.
• Employees of both companies may experience changes in their roles and benefits.
• Customers of both banks will be integrated into a single platform.
• Suppliers and creditors of both companies will be subject to the terms of the combined entity.

Next Steps

• HomeStreet shareholders will vote on the merger agreement.
• FirstSun shareholders will vote on the share issuance and charter amendment.
• The companies will seek regulatory approvals from the Federal Reserve and the Office of the Comptroller of the Currency.
• FirstSun will file a registration statement on Form S-4 with the SEC.

Key Dates

Keywords

merger, acquisition, capital raise, FirstSun Capital Bancorp, HomeStreet, Sunflower Bank, HomeStreet Bank, Wellington Management, bank merger, financial services