425: Atlantic Union Bankshares to Acquire Sandy Spring Bancorp in $1.6 Billion All-Stock Deal

Atlantic Union Bankshares Corporation will acquire Sandy Spring Bancorp in an all-stock transaction valued at approximately $1.6 billion, creating a leading regional bank in the Mid-Atlantic.

Summary

• Atlantic Union Bankshares Corporation (Atlantic Union) and Sandy Spring Bancorp (Sandy Spring) have entered into a definitive merger agreement.
• Atlantic Union will acquire Sandy Spring in an all-stock transaction valued at approximately $1.6 billion.
• The combined company will have pro forma total assets of $39.2 billion, total deposits of $32.0 billion, and gross loans of $29.8 billion, based on financial data as of September 30, 2024.
• The merger will enhance the combined company's presence in Northern Virginia and Maryland.
• The combined company will have 182 branch locations and Atlantic Union will approximately double its wealth business by increasing assets under management by more than $6.5 billion.
• Each outstanding share of Sandy Spring common stock will be converted into the right to receive 0.900 shares of Atlantic Union common stock, valuing the transaction at approximately $34.93 per Sandy Spring common share based on Atlantic Union's closing stock price on October 18, 2024.
• Three members of the Sandy Spring board of directors, including Dan Schrider, will join the Atlantic Union board of directors upon the closing of the transaction.
• The companies expect to complete the transaction by the end of the third quarter of 2025, subject to customary closing conditions, regulatory approvals, and shareholder approvals.
• Cost savings of approximately 27% of Sandy Spring's annual operating expense are expected, with 50% phase-in during the second half of 2025 and 100% in 2026 and thereafter.
• The transaction is expected to result in $115 million of after-tax one-time merger expenses, which will be fully reflected in pro forma tangible book value dilution at closing.

Sentiment

Score: 8

Explanation: The document presents a highly positive outlook on the merger, emphasizing strategic benefits, financial gains, and shareholder value creation. The management comments and detailed financial projections contribute to the optimistic sentiment.

Positives

• The merger creates the largest regional bank headquartered in the lower Mid-Atlantic, enhancing the combined company's presence in Northern Virginia and Maryland.
• The combined company will have a robust pro forma balance sheet position with capacity for growth.
• The transaction is expected to be significantly accretive to Atlantic Union's earnings per share.
• The merger is expected to improve key profitability metrics, including ROA, ROTCE, and efficiency ratio.
• The combined company will benefit from a proven track record of conservative credit and culturally-aligned commercial banking expertise.
• The merger will approximately double Atlantic Union's wealth business by increasing assets under management by more than $6.5 billion.

Negatives

• The transaction will result in $115 million of after-tax one-time merger expenses, which will be fully reflected in pro forma tangible book value dilution at closing.
• The transaction is subject to customary closing conditions, including regulatory approvals and approval by Atlantic Union shareholders and Sandy Spring stockholders, which may not be obtained.

Risks

• The occurrence of any event, change, or other circumstances that could give rise to the right of one or both parties to terminate the merger agreement.
• Failure to obtain necessary regulatory approvals, which may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction.
• The possibility that the anticipated benefits of the proposed transaction, including anticipated cost savings and strategic gains, are not realized when expected or at all.
• The possibility that the integration of the two companies may be more difficult, time-consuming, or costly than expected.
• Potential adverse reactions from customers or changes to business or employee relationships resulting from the announcement or completion of the proposed transaction.
• A material adverse change in the financial condition of Atlantic Union or Sandy Spring.
• Risks relating to the potential dilutive effect of shares of Atlantic Union's common stock to be issued in the proposed transaction.

Future Outlook

The combined company expects to complete the transaction by the end of the third quarter of 2025, subject to customary closing conditions, including regulatory approvals and approval by Atlantic Union shareholders and Sandy Spring stockholders. The combined company anticipates significant earnings accretion and improved profitability metrics.

Management Comments

• John C. Asbury, President and Chief Executive Officer of Atlantic Union, stated that the partnership with Sandy Spring will create a preeminent regional bank that spans the lower mid-Atlantic into the Southeast and that is committed to the communities it serves.
• Daniel J. Schrider, Chair, President and CEO of Sandy Spring Bank, stated that the combination will deliver enhanced scale, diversity in the market, and capabilities for their clients, and it will provide greater opportunities for their employees to grow within a larger organization.
• Ron Tillett, Chairman of Atlantic Union's Board of Directors, stated that the combination of the two companies creates a uniquely valuable franchise that is able to better serve their customers as well as their communities, while creating long-term shareholder value.

Industry Context

This announcement reflects a trend of consolidation in the banking industry, as institutions seek to gain scale, improve efficiency, and expand their market presence. The merger positions Atlantic Union as a leading regional bank in the Mid-Atlantic region, enhancing its competitive position against other large and mid-sized banks.

Comparison to Industry Standards

• The pro forma metrics, such as ROA, ROTCE, and efficiency ratio, are expected to place the combined company in the top quartile among its peers.
• The transaction is expected to be immediately accretive to earnings, which is a positive indicator compared to industry standards for M&A deals.
• The tangible book value earn-back period of 2.0 years is relatively short, suggesting a quick recovery of the initial dilution.

Management Changes

Stakeholder Impact

• Shareholders are expected to benefit from significant earnings accretion and a short tangible book value earn-back period.
• Customers will gain access to a broader range of services and an expanded branch network.
• Employees will have expanded career opportunities within a larger organization.
• Communities will benefit from a $9.5 billion community impact plan.

Next Steps

• Atlantic Union and Sandy Spring will prepare and file the Joint Proxy Statement/Prospectus and the S-4 with the SEC.
• The companies will seek regulatory approvals and shareholder approvals.
• The companies will work towards completing the transaction by the end of the third quarter of 2025.

Key Dates