JASPER — German American Bancorp Inc. and Citizens Union Bancorp of Shelbyville Inc. have announced a definitive agreement to merge Citizens into German American.
Upon completion of the transaction, Citizen’s subsidiary bank, Citizens Union Bank of Shelbyville Inc., will be merged into German American’s subsidiary bank, German American Bank.
“This merger with Citizens Union represents another important, strategic opportunity for German American and enhances our presence in the vibrant Louisville, Kentucky, metropolitan market area,” said Mark Schroeder, chairman and chief executive officer of German American.
“Our combined operations in the broader Louisville market area places us in a top 10 market share position in the largest metropolitan market area in the commonwealth of Kentucky,” he said. “We are excited to welcome the Citizens Union customers, employees, communities and shareholders to the German American family.”
He said he expects the strategic transaction will be materially accretive to German American’s earnings per share during the 12 months following completion of the transaction and will have a relatively quick tangible book value earn-back period of less than three years.
“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 markets in Kentucky as well as within and adjacent to our existing southern Indiana market area,” Schroeder said.
Under terms of the definitive agreement, Citizen common shareholders will receive a fixed exchange ratio of 0.7739 shares of German American common stock for each share of Citizens stock in a tax-free exchange and a cash payment of $13.44 per share.
Based on the number of Citizens common shares expected to be outstanding at closing, German American would issue approximately 2.9 million shares of its common stock and pay approximately $49.8 million cash for all of the issued and outstanding common shares of Citizens.
German American also has agreed upon completion of the merger to make a cash payment in cancellation of Citizens’ unexercised stock options, which payment currently is estimated to total approximately $0.9 million, if none of the outstanding options were to be exercised before closing.
Based upon the $35.99 per share volume-weighted average price of German American’s common shares over the 10-day trading period ending Sept. 17, the transaction has an aggregate indicated value of approximately $154 million with the total merger consideration being split between stock and cash on an approximate 67:33 basis. Upon consummation of the transaction, German American and Citizens will have combined assets of approximately $6.4 billion, based upon June 30, 2021, financials.
The combined company would have 83 banking offices in 19 counties in Indiana and 15 counties in Kentucky. That includes a German American Bank branch office at 1725 E. Tipton St. in Seymour.
David Bowling, CEO of Citizens, said the strategic partnership with German American, one of the best performing community banking organizations in the nation, will enable the company to deepen and broaden the financial services offerings offered by the banking company.
The transaction is expected to close in the first quarter of 2022. Completion of the transaction is subject to approval by regulatory authorities and by holders of a majority of the issued and outstanding common shares of Citizens as well as certain other closing conditions.
In connection with the definitive agreement, German American entered into a voting agreement with each of the members of the Citizens board of directors and with certain other shareholders, who collectively hold approximately 60% of the outstanding shares of Citizens common stock. Subject to the terms and conditions of the voting agreement, the shareholders who are parties to the agreement have agreed to vote their shares in favor of the transactions contemplated by the definitive agreement.