German American acquires River Valley Financial; expands into eastern Indiana
Monday, German American Bancorp, Inc. and River Valley Bancorp announced the two banks will merge.
Upon completion of the transaction, River Valley’s subsidiary bank, River Valley Financial Bank, will be merged into
German American’s similarly-named subsidiary bank, German American Bancorp.
“This merger with River Valley represents a strategic opportunity for German American to enhance our previously stated objective of expanding our Southern Indiana footprint into the vibrant Southeast Indiana market area,” Mark A. Schroeder, Chairman and CEO of German American said. “River Valley has built a solid community banking franchise in three distinct markets in which German American can provide our extensive offerings of banking, insurance, and investment products and services to River Valley’s current and prospective clients. The combination of our two organizations expands German American’s footprint into the greater Madison, Indiana market, which is very similar to our other heritage markets in Southern Indiana.”
Much like German American’s experience within our heritage markets, River Valley has operated in Madison for over a century and is a leader in the market from both a business and civic perspective. Additionally, they have a strong presence with five banking offices in the vibrant and rapidly growing market area of the Indiana side of the Louisville, Kentucky MSA, a market which German American has recently entered with a commercial loan production office.
“River Valley also has a presence in the Seymour and North Vernon, Indiana markets, which match-up very well with German’s American growing franchise in the adjacent Columbus, Indiana market. This opportunity to enhance our existing presence in two of German American’s newest markets in Columbus and New Albany, Indiana, as well as allowing for a new market presence in Madison, Indiana makes this merger a perfect fit for 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 forma capital ratios will continue to significantly exceed regulatory well capitalized levels, enabling us to continue to take advantage of future growth opportunities
throughout our market area.”
Matthew P. Forrester, President & CEO of River Valley, stated, “We believe German American is an ideal partner for our bank, and we are delighted to become a part of German American’s organization. Like River Valley, German American is deeply committed to the communities it serves and through this combination of our two community-focused organizations, we will be in a position to better serve our customers through increased convenience as well as the addition of broader financial services. German American’s reputation, financial strength and capabilities
will enhance our ability to meet the expanding needs of our customers. Furthermore, our shareholders will be receiving shares of a strong, successful banking company, with greater market liquidity and trading volume than the market for our shares.”
German American’s retail banking office presence covers more than three dozen locations in 13 southern Indiana counties. It also has a brokerage and financial planning subsidiary and a full service property and casualty insurance agency. River Valley has 14 banking offices in Indiana and Kentucky.
The transaction is expected to be completed in early 2016. Completion of the transaction is subject to approval by regulatory authorities and River Valley’s shareholders as well as certain other closing conditions.
Under terms of the definitive agreement, River Valley common shareholders will receive 0.770 shares of German American common stock for each share of River Valley in a tax free exchange, plus a cash payment of $9.90 per River Valley share.
Based upon the $30.02 per share 20-day volume weighted average price of German American’s common shares ending on October 22, 2015 (the valuation upon which the exchange ratio was established), the transaction has a value of $33.00 per River Valley common share.
This represents a premium of 47 percent over the $22.40 closing price of River Valley’s common shares on October 23, 2015. Because a portion of the consideration to be received is German American’s common stock, the transaction value will fluctuate until closing together with the market price of German American’s common shares.
Based on River Valley’s number of common shares currently outstanding, German American expects to issue approximately 1.94 million shares of its common stock, and pay approximately $25 million cash, for all of the issued and outstanding common shares and outstanding options of River Valley.
On this basis, the transaction has an aggregate indicated value (valuing German American’s common shares at the 20-day volume weighted average price ending on October 22, 2015) of approximately $83.5 million. The basic transaction value also includes the approximately $500 thousand in cash payments to be made in cancellation of stock options.
