Washington Federal Inc.
) announced a deal to acquire Oregon-based South Valley Bancorp
Inc. According to the deal, South Valley's wholly owned subsidiary,
South Valley Bank & Trust, will also merge with WAFD's wholly
owned subsidiary, Washington Federal, subsequent to the merger of
both the parent companies.
The deal is anticipated to be closed by October end. Moreover,
the agreement is still subject to customary closing conditions,
along with the consent of South Valley shareholders and regulatory
Terms of the Deal
As per the agreement, each share of South Valley will be traded
for 0.2962 shares of WAFD at the closure of the deal. The shares of
South Valley were priced at $5.00 per share, representing 51% of
South Valley's tangible book value as of December 31, 2011.
Additionally, based on the collections made by South Valley on a
specified group of its assets, WAFD will pay a maximum amount of
about $39 million. Also, a supplementary cash payment will be made
to South Valley's shareholders considering the time period of such
If the collection of specified assets of South Valley is
completed before the closure of the deal, WAFD will disburse an
extra amount of $5.81 per share to the shareholders of South
Valley. On the other hand, if the specified assets are collected
entirely within the first five years post-merger, the company will
shell out a $2.97 per share.
Hence, for each share of South Valley, which is valued at $5 per
share, the shareholders will receive a minimum of $7.98 per share
to a maximum of $10.81 per share.
WAFD further stated that the merger will result in the combined
company having 190 offices in 8 western states. Total assets and
total deposits of the combined company will sum up to $14.4 billion
and $9.6 billion, respectively, based on financial results as of
December 31, 2011.
Furthermore, the combined company will have access to a bigger
branch network, higher liquidity and increased lending capacity,
which will propel the profitability going forward. For WAFD, this
merger will help strengthen its foothold in southern and central
Oregon, which in turn will thrust its banking and commercial real
estate businesses towards stronger growth. Also, the merger is
expected to boost the earnings of the company.
WAFD has always been inclined towards mergers and acquisitions
due to its strong capital base. In 2011, the company acquired
Albuquerque, New Mexico-based Charter Bank and Phoenix,
Arizona-based failed Western National Bank.
In 2010, WAFD acquired all of the deposits of Horizon Bank of
Bellingham, Washington. Also, the company had acquired First Mutual
Bancshares Inc. and First Federal Banc of the Southwest Inc. in
2008 and 2007, respectively.
These mergers and acquisitions have helped WAFD increase its
assets, branch network and workforce, which has strengthened its
market share substantially. Historically, the company has grown
with the help of mergers and assumptions of deposits. Also, looking
at the successful integration of the acquired companies by WAFD as
well as its strong capital and liquidity position, we believe that
the company is poised to grow further through acquisitions.
Currently, WAFD retains a Zacks #3 rank, which translates into a
short-term Hold rating. However, one of its peers,
Capitol Federal Financial Inc.
) retains a Zacks #2 Rank (a short-term Buy rating).
CAPITOL FEDL FN (
): Free Stock Analysis Report
WASH FEDL INC (
): Free Stock Analysis Report
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