8-K: Old National Bancorp Addresses Merger Lawsuit and Provides Supplemental Disclosures

Old National Bancorp is supplementing its merger prospectus with additional financial details following a lawsuit and demand letters challenging the CapStar merger.

Summary

• Old National Bancorp is proceeding with its planned merger with CapStar Financial Holdings, despite a lawsuit and demand letters alleging inadequate disclosures.
• The lawsuit claims CapStar and its directors failed to disclose material facts and breached fiduciary duties, with Old National accused of aiding and abetting.
• To avoid delays and minimize costs, Old National is providing supplemental disclosures to the definitive prospectus, without admitting any wrongdoing or legal necessity.
• The supplemental disclosures include additional details on financial analysis performed by Morgan Stanley, including comparable company multiples and dividend discount analysis for both CapStar and Old National.
• CapStar's dividend distributions were estimated to be $11 million as of June 30, 2023, $16 million as of December 31, 2023, $15 million as of December 31, 2024, $9 million as of December 31, 2025, $19 million as of December 31, 2026, $20 million as of December 31, 2027 and $20 million as of December 31, 2028.
• Old National's dividend distributions were estimated to be $51 million as of June 30, 2023, $273 million as of December 31, 2023, $326 million as of December 31, 2024, $520 million as of December 31, 2025, $450 million as of December 31, 2026, $464 million as of December 31, 2027 and $478 million as of December 31, 2028.
• The supplemental disclosures also include forecasted net income, earnings per share, and risk-weighted assets for both CapStar and Old National for 2023, 2024, and 2025.
• CapStar's forecasted net income is $29 million, $28 million, and $29 million for 2023, 2024, and 2025 respectively.
• CapStar's forecasted earnings per share is $1.40, $1.36, and $1.41 for 2023, 2024, and 2025 respectively.
• CapStar's forecasted risk weighted assets are $2.8 billion, $3.0 billion, and $3.1 billion for 2023, 2024, and 2025 respectively.
• Old National's forecasted net income is $594 million, $552 million, and $554 million for 2023, 2024, and 2025 respectively.
• Old National's forecasted earnings per share is $2.03, $1.84, and $1.86 for 2023, 2024, and 2025 respectively.
• Old National's forecasted risk weighted assets are $37.6 billion, $39.9 billion, and $40.2 billion for 2023, 2024, and 2025 respectively.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to the lawsuit and demand letters, but the company is taking proactive steps to address the issues. The supplemental disclosures provide more information, which is generally positive, but the underlying legal challenges create uncertainty.

Positives

• Old National is proactively addressing the lawsuit and demand letters by providing supplemental disclosures.
• The supplemental disclosures provide additional transparency regarding the financial analysis of the merger.
• The company is taking steps to minimize potential delays and costs associated with the litigation.

Negatives

• A lawsuit has been filed challenging the merger, which could potentially delay or disrupt the process.
• Demand letters from shareholders also raise concerns about the adequacy of the initial disclosures.
• The need for supplemental disclosures suggests potential weaknesses in the original merger documentation.

Risks

• The lawsuit could lead to an injunction preventing the merger from being completed.
• The litigation and demand letters could result in additional costs and delays.
• There is a risk that the supplemental disclosures may not fully address the concerns raised by the plaintiffs and shareholders.
• The merger is subject to regulatory approvals and shareholder votes, which could be delayed or not obtained.

Future Outlook

The document includes forward-looking statements regarding the expected timing, completion, financial benefits, and other effects of the merger, but cautions that actual results may differ materially due to various risks and uncertainties.

Management Comments

• Old National and CapStar believe that the claims asserted in the Matters are without merit and that supplemental disclosures are not required or necessary under applicable laws.
• Old National and CapStar specifically deny all allegations in the Matters that any additional disclosure was or is required.

Industry Context

This announcement is relevant to the banking industry, where mergers and acquisitions are common. The lawsuit and supplemental disclosures highlight the importance of transparency and due diligence in such transactions. The comparable company analysis provides insight into how Old National and CapStar are valued relative to their peers.

Comparison to Industry Standards

• The document provides a detailed comparison of Old National and CapStar to their peers using metrics like Price/TBV and Price/2024E.
• For CapStar, comparable companies include Seacoast Banking Corporation of Florida, FB Financial Corporation, and First Bancorp (Southern Pines, North Carolina), among others.
• For Old National, comparable companies include Comerica Incorporated, Zions Bancorporation, and First Horizon Corporation, among others.
• The multiples used in the analysis are consistent with industry standards for valuing banks.
• The dividend discount analysis uses a range of discount rates and terminal multiples that are typical for this type of valuation.

Legal Proceedings

• A lawsuit has been filed challenging the merger, alleging inadequate disclosures and breaches of fiduciary duty.
• Demand letters have been received from shareholders raising similar concerns.

Stakeholder Impact

• Shareholders of CapStar are impacted by the merger and the related litigation.
• Shareholders of Old National are impacted by the merger and the potential risks and benefits.
• Employees of both companies may be impacted by the integration process.

Next Steps

• CapStar shareholders will vote on the merger.
• Old National and CapStar will seek required governmental approvals.
• The companies will continue to defend against the lawsuit and demand letters.

Key Dates

Keywords

merger, acquisition, litigation, disclosure, financial analysis, banking, CapStar, Old National, lawsuit, shareholders