Focus Bank Takeover

One of the banks in our income portfolio in the monthly letter is taking over one of the banks in the Focus stock portfolio. The proposed deal price we will have a total return on our shares of about 33% annually.

Peoples Bancorp Inc. ("Peoples") (NASDAQ: PEBO) and Limestone Bancorp, Inc. ("Limestone") (NASDAQ: LMST), jointly announced today the signing of a definitive agreement and plan of merger (the "Merger Agreement") pursuant to which Peoples will acquire, in an all-stock merger, Limestone, a bank holding company headquartered in Louisville, Kentucky, and the parent company of Limestone Bank, Inc. ("Limestone Bank"). Under the terms of the Merger Agreement, Limestone will merge with and into Peoples (the "Merger"), and Limestone Bank will subsequently merge with and into Peoples' wholly owned subsidiary, Peoples Bank, in a transaction valued at approximately $208.2 million.

Upon completion of the Merger, the combined company will have approximately $8.5 billion in total assets, $5.7 billion in total loans and $7.1 billion in total deposits with 150 locations in Ohio, West Virginia, Kentucky, Maryland, Virginia and Washington, D.C.

According to the terms of the Merger Agreement, which has been unanimously approved by the Boards of Directors of both companies, shareholders of Limestone will receive 0.90 shares of Peoples common stock for each share of Limestone common stock, and the Merger is expected to qualify as a tax-free reorganization for Limestone shareholders. Based on Peoples' closing price of $30.28 per share as of October 21, 2022, the aggregate deal value is approximately $208.2 million, or $27.25 per share. The transaction is expected to be immediately accretive to Peoples' estimated earnings before one-time costs, with a tangible book value earn back of approximately 2.8 years (inclusive of interest rate marks), and an internal rate of return in excess of 20%.

Posted to Banking on Profit on Oct 26, 2022 — 11:10 AM
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