425: Sandy Spring Bancorp and Atlantic Union Bankshares Face Shareholder Lawsuits, Issue Supplemental Merger Disclosures

Sandy Spring Bancorp and Atlantic Union Bankshares are supplementing their merger proxy statement following shareholder lawsuits alleging misleading disclosures, while maintaining the claims are without merit.

Summary

• Sandy Spring Bancorp and Atlantic Union Bankshares are proceeding with their planned merger, despite facing multiple shareholder lawsuits.
• The lawsuits allege that the companies made false and misleading statements in their merger registration statement.
• To avoid potential delays and costs associated with litigation, the companies are providing supplemental disclosures to their joint proxy statement/prospectus.
• The supplemental disclosures include additional details about the background of the merger, the financial analysis conducted by their advisors, and the governance of the combined entity.
• The companies maintain that the claims are without merit and that the supplemental disclosures are not legally required.
• Atlantic Union has retained Sodali & Co for proxy solicitation services for a fee of $25,000 plus additional fees and expenses.
• The merger is expected to be accretive to Atlantic Union's earnings per share by approximately 23% and dilutive to its tangible book value per share by approximately 8%.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While the merger is progressing and expected to be accretive, the presence of shareholder lawsuits and the need for supplemental disclosures introduce uncertainty and potential risks.

Positives

• The merger is expected to be accretive to Atlantic Union's earnings per share by approximately 23%.
• The companies are proactively addressing shareholder concerns by providing supplemental disclosures.
• The merger is expected to enhance and expand Atlantic Union's scale, diversity, and capabilities in key Mid-Atlantic markets.

Negatives

• Multiple shareholder lawsuits and demand letters have been filed, alleging misleading disclosures.
• The merger is expected to be dilutive to Atlantic Union's tangible book value per share by approximately 8%.
• The companies are incurring additional costs and risks associated with litigation and supplemental disclosures.

Risks

• The lawsuits could potentially delay or adversely affect the merger.
• The integration of the two companies may be more difficult, time-consuming, or costly than expected.
• There is a risk that the anticipated benefits of the merger may not be fully realized.
• Changes in economic and market conditions, interest rates, and regulatory actions could impact the merger's success.
• The potential dilutive effect of shares of Atlantic Union's common stock to be issued in the merger is a risk.

Future Outlook

The companies are proceeding with the merger, but the timing and success are subject to regulatory approvals, shareholder votes, and the resolution of legal challenges. The combined company anticipates benefits from increased scale and market presence.

Management Comments

• Atlantic Union and Sandy Spring believe that the claims asserted in the Matters are without merit.
• Atlantic Union and Sandy Spring deny that they have violated any laws or breached any fiduciary duties.
• The companies are supplementing the joint proxy statement/prospectus to avoid the risk that the Matters delay or otherwise adversely affect the Merger.

Industry Context

The merger is part of a broader trend of consolidation in the banking industry, as institutions seek to gain scale and improve efficiency. The deal is taking place in the Mid-Atlantic region, where both banks have a significant presence. The merger is also occurring in a period of increased regulatory scrutiny and shareholder activism.

Comparison to Industry Standards

• The document provides comparable company analysis for both Sandy Spring and Atlantic Union, using metrics like Price/2025E EPS and Price/TBV.
• Sandy Spring's Price/2025E EPS of 12.6x is within the range of its selected peer group, with a median of 12.4x.
• Atlantic Union's Price/2025E EPS of 11.9x is also within the range of its selected peer group, with a median of 12.8x.
• The precedent transactions analysis shows the merger's Price/Forward EPS of 13.5x is within the range of recent bank mergers, with a median of 12.4x.
• The merger's Price/TBV of 1.3x is also within the range of recent bank mergers, with a median of 1.5x.
• The core deposit premium of 3.3% for the merger is lower than the median of 5.3% for precedent transactions.

Legal Proceedings

• Multiple lawsuits have been filed by shareholders of Atlantic Union, alleging misleading disclosures related to the merger.
• Demand letters have been received from counsel representing individual purported stockholders of Sandy Spring, also alleging misleading disclosures.

Stakeholder Impact

• Shareholders of both companies are impacted by the merger and the associated legal proceedings.
• Employees of both companies may be affected by the integration process.
• Customers of both banks may experience changes in services and products.
• The merger could impact the competitive landscape for other financial institutions in the region.

Next Steps

• The companies will continue to seek regulatory approvals for the merger.
• Shareholders of both companies will vote on the merger.
• The companies will continue to defend against the shareholder lawsuits.
• The companies will work towards integrating their operations after the merger is completed.

Key Dates

Keywords

merger, lawsuit, proxy statement, Atlantic Union Bankshares, Sandy Spring Bancorp, shareholder, acquisition, financial analysis, disclosure, exchange ratio