German American Bancorp and First Security in Owensboro announce merger

OWENSBORO, Ky. (May 22, 2018) — German American Bancorp, Inc. and First Security Inc. announced today that they have entered into a definitive agreement to merge First Security into German American. Upon completion of the transaction, First Security’s subsidiary bank, First Security Bank, Inc., will be merged into German American’s subsidiary bank, German American Bank.

Under terms of the definitive agreement, First Security common shareholders will receive a fixed exchange ratio of 0.7982 shares of German American common stock for each share of First Security in a tax free exchange, and a cash payment of $12.00 per First Security share. After completion of the merger, it is anticipated that a board member of First Security will be joining the board of German American. In addition, Michael F. Beckwith, president and CEO of First Security, will assume the newly established role of Kentucky divisional president.

Based upon the $35.08 per share 20-day volume weighted average price of German American’s common shares ending on May 18, 2018 (the valuation upon which the exchange ratio was established), the transaction has a value of $40.00 per First Security common share. Because a portion of the consideration to be received is German American’s common stock, the stock portion of the transaction value will fluctuate until closing together with the market price of German American’s common shares.

Based on First Security’s number of common shares currently outstanding and the anticipated conversion of First Security’s remaining convertible subordinated debt to common shares at closing, German American expects to issue approximately 2.0 million shares of its common stock, and pay approximately $31 million cash, for all of the issued and outstanding common shares and outstanding options of First Security. Based upon the $35.08 per share 20-day volume weighted average price of German American’s common shares ending on May 18, 2018, the transaction has an aggregate indicated value of approximately $101.0 million, with the total merger consideration being split between stock and cash on an approximate 70:30 basis.

Mark A. Schroeder, chairman and CEO of German American, stated, “This merger with First Security represents a strategic opportunity for German American to expand our community-focused, customer-centric business model into the vibrant Kentucky metropolitan markets of Owensboro, Bowling Green, and Lexington. First Security has built a solid community banking franchise in these three distinct Kentucky markets in which German American can provide our extensive offerings of banking, insurance, and investment products and services to First Security’s current and prospective clients.

The combination of our two organizations provides an important entrance for German American into three of the largest Kentucky metropolitan market areas, and enhances German American’s existing presence in the Evansville, Ind. metropolitan market area, which is the third largest metropolitan market in Indiana and where we currently hold a significant and growing market share. We’re extremely excited about the multiple future organic growth opportunities this merger will afford our Company.”

Schroeder continued, “We expect that this strategic transaction will be accretive to German American’s earnings per share during the 12 months following completion of the transaction, and will have a quick tangible book value earn back. Following completion of the merger, German American’s pro form a capital ratios will continue to significantly exceed regulatory well-capitalized levels, enabling us to continue to take advantage of future organic and acquisition growth opportunities in Kentucky and throughout our existing Southern Indiana market area.”

Michael F. Beckwith, president and CEO of First Security, stated, “This partnership with German American will enable us to deepen and broaden the financial services we provide in all of our markets, and will provide great opportunity for both our customers and employees. Strategically and culturally, we are well aligned with German American, and through this partnership, German American is gaining a meaningful presence in Kentucky.”

From a shareholder perspective, German American is one the nation’s best-performing community banking organizations, and their NASDAQ listed stock provides our shareholders with enhanced liquidity and trading volume. German American’s reputation, financial strength and capabilities will provide tremendous value to our customers, employees, communities and shareholders.”

The transaction is expected to be completed in the fourth quarter of 2018. Completion of the transaction is subject to approval by regulatory authorities and First Security’s shareholders, as well as certain other closing conditions. In connection with the definitive agreement, German American entered into voting agreements with the members of the Board of Directors of First Security and with certain of First Security’s principal shareholders, who collectively hold approximately 27 percent of the outstanding shares of First Security common stock. Subject to the terms and conditions of the voting agreements, these parties have agreed to vote their shares in favor of the transactions contemplated by the definitive agreement.

Please wait...

Subscribe to the FASTER LANE business newsletter.

Subscribe and receive breaking Kentucky business news and updates daily.