Texas Capital Bancshares and Independent Bank Group announced Monday that they agreed to combine in an all-stock merger of equals valued at $5.5 billion, creating the largest Texas-headquartered bank by Texas deposits and the top Texas-based super regional bank.
Both banks went with lawyers outside of Texas as their main outside counsel, including Sullivan & Cromwell for Dallas-based Texas Capital and Wachtell, Lipton, Rosen & Katz for McKinney-based Independent.
Rodgin Cohen was the lead partner at Sullivan & Cromwell handling the transaction and Edward Herlihy was the lead partner from Wachtell. Both are based in New York City.
Alston & Bird said it assisted Sullivan & Cromwell as counsel for Texas Capital on the deal, including partner Sandy Brown and associate Anna Chong in Dallas.
Willkie Farr & Gallagher counseled Texas Capital CEO and president C. Keith Cargill, who will become the merged company’s special advisor on talent and client retention and strategic initiatives (partners Steve Seidman and Mark Holdsworth in New York).
Kelly Rentzel led the deal as general counsel for Texas Capital while Mark Haynie did so for Independent, where he serves as general counsel. It’s not clear who will be general counsel of the combined entity.
Jefferies and Goldman Sachs are financial advisors to Texas Capital while Stifel unit Keefe, Bruyette & Woods is assisting Independent. Sandler O’Neill provided a fairness opinion to Independent’s board.
The merger has to clear regulators and both sets of shareholders but is expected to close in mid-2020.
Independent has used Wachtell on deals before, including its purchase of Guaranty Bancorp of Denver last year for $1 billion. And it previously tapped Dallas lawyers from then-Andrews Kurth Kenyon on capital markets work, including a $150 million follow-on equity offering in 2017.
Among the attorneys handling that transaction, partner Joe Hoffman and associate Ethan Post have since moved to Katten and tax partner Will Becker jumped to Locke Lord. Partner Dudley Murrey remains at now-Hunton Andrews Kurth.
Bracewell previously represented Texas Capital on deals, but the partners moved to Alston & Bird in 2016 (Brown and partner Michael Tankersley, both of whom continued to work with Texas Capital).
Haynie has represented Independent since its formation in 2002. Before that he was a founding shareholder of Haynie Rake Repass & Klimko, which focused on representing community banks. He’s a graduate of the University of Texas School of Law.
Rentzel has been at Texas Capital since 2012, starting as director of legal services and taking on the general counsel role in 2016. Before that the SMU-educated lawyer was a law clerk at a U.S. District Court and an associate at Sayles Werbner and Baker Botts.
Texas Capital shareholders will receive 1.0311 of a share of Independent for each of their shares. Texas Capital stockholders will end up owning 55% of the combined company while Independent shareholders will hold 45%.
Once the deal is consummated, the combined company expects to offer an annualized dividend on its common stock of $1 per share if it’s cleared by its board.
The banks said the merger will give them enhanced scale and resources to serve clients nationally. The two will have a combined $48 billion in assets and $39 billion in deposits.
The name of the combined holding company will be Independent Bank Group and the name of the combined bank will be Texas Capital, with the corporate headquarters in McKinney. Retail locations in Colorado will continue to operate and keep the Independent Financial branding.
Cargill said in the announcement that the accretive transaction delivers significant value to the bank’s shareholders with substantial growth drivers, the annual dividend and an increased profitability run rate with meaningful synergies.
Independent chairman and CEO David R. Brooks, who will lead the combination, said the merger was the logical next step for both companies, noting that Independent has doubled its assets every two years through transactions.
The banks said the combined company will have a strong presence in five of the top 10 fastest growing MSAs, or metropolitan statistical areas, in the U.S.
The transaction is projected to deliver 27% tangible book value per share accretion, 26% earnings per share accretion to Independent Bank Group and 14% earnings per share accretion to Texas Capital by the first full year after close, assuming 75% phase-in of cost savings.
The two also expect $100 million in annual run-rate cost synergies, return on tangible common equity of 15% and return on average assets of 1.3%.
Brooks’ leadership team will include five Texas Capital executives and four Independent executives. The board will be made up of seven directors from Texas Capital and six directors from Independent.
Larry L. Helm, Texas Capital’s non-executive chairman of the board, will serve as lead independent director of the combined company’s board.