425: SouthState to Acquire Independent Bank Group in $2 Billion All-Stock Deal

SouthState Corporation will acquire Independent Bank Group in an all-stock transaction valued at approximately $2 billion, expanding its presence in high-growth markets.

Summary

• SouthState Corporation and Independent Bank Group have entered into a definitive agreement for SouthState to acquire Independent Bank Group in an all-stock transaction.
• The deal is valued at approximately $2 billion.
• Independent Bank Group has approximately $18.9 billion in total assets, $15.7 billion in total deposits, and $14.6 billion in total loans as of March 31, 2024.
• The combined company will have pro forma total assets of $65 billion, deposits of $55 billion, and gross loans of $48 billion.
• Independent Bank Group shareholders will receive 0.60 shares of SouthState common stock for each share of Independent Bank Group common stock.
• Based on SouthState's closing stock price of $80.85 as of May 17, 2024, this equates to a per share value of $48.51.
• Three Independent Bank Group directors, including David Brooks, will join the SouthState Corporation and SouthState Bank boards.
• The transaction is expected to close by the end of the first quarter of 2025.
• The transaction is subject to customary closing conditions, including regulatory and shareholder approvals.
• Keefe, Bruyette & Woods is serving as financial advisor to Independent Bank Group, and Raymond James & Associates is serving as financial advisor to SouthState.

Sentiment

Score: 8

Explanation: The document presents a positive outlook on the merger, highlighting the strategic benefits, financial attractiveness, and growth potential of the combined company. The management comments and financial projections contribute to a favorable sentiment.

Positives

• The merger creates a $65 billion financial institution with a strong presence in high-growth markets.
• The transaction is expected to be significantly EPS accretive with manageable tangible book value dilution.
• The combined company is expected to have peer-leading pro forma profitability.
• The merger diversifies SouthState's footprint into similar high-growth markets with deep local connections.
• The combined company will have a granular customer base with a history of resilient credit.
• The addition of Independent Bank Group's team and expertise is expected to enhance SouthState's capabilities.

Negatives

• The transaction involves tangible book value dilution, although the earnback period is projected to be relatively short.
• The integration of the two companies could present challenges and may take longer or be more costly than expected.
• The transaction is subject to regulatory and shareholder approvals, which may not be received or may result in the imposition of conditions that could adversely affect the combined company.

Risks

• The occurrence of any event that could give rise to the termination of the merger agreement.
• The outcome of any legal proceedings that may be instituted against SouthState or Independent Bank Group.
• The possibility that the transaction does not close when expected or at all.
• The risk that the benefits from the transaction may not be fully realized or may take longer to realize than expected.
• Disruption to the parties' businesses as a result of the announcement and pendency of the transaction.
• Reputational risk and potential adverse reactions of customers, suppliers, employees, or other business partners.
• A material adverse change in the financial condition of SouthState or Independent Bank Group.
• General competitive, economic, political, and market conditions.

Future Outlook

The combined company will be well-positioned for future success, with a strong presence in high-growth markets and a diversified footprint.

Management Comments

• John C. Corbett, Chief Executive Officer of SouthState, stated that Independent Bank Group is a great fit with SouthState due to its local, geographic management model, industry-leading track record on credit, and presence in some of the best markets in the country.
• David R. Brooks, Chairman and CEO of Independent Bank Group, stated that the combination of the two companies operating in growing markets provides a great opportunity for Independent Bank Group teammates, clients, and communities to flourish.

Industry Context

The acquisition reflects a trend of consolidation in the banking industry, as institutions seek to gain scale, expand their geographic reach, and enhance their competitiveness.

Management Changes

Stakeholder Impact

• Shareholders of Independent Bank Group will receive SouthState shares, potentially benefiting from the combined company's future growth.
• Customers of both banks will have access to a broader range of products and services.
• Employees of both banks will have opportunities for career advancement within the larger organization.
• Communities served by both banks will benefit from increased investment and support.

Next Steps

• SouthState and Independent Bank Group will file a registration statement on Form S-4 with the SEC.
• SouthState and Independent Bank Group will seek regulatory approvals.
• SouthState and Independent Bank Group will seek shareholder approvals.
• SouthState and Independent Bank Group will work to close the transaction by the end of the first quarter of 2025.

Key Dates