Nashville, Tenn.-based First American Corporation (Nasdaq: FATN) and Jackson, Miss.-based Deposit Guaranty Corp. (NYSE: DEP) today announced the signing of a definitive agreement under which Deposit Guaranty will be merged into First American.
E.B. Robinson Jr., chairman and CEO of Deposit Guaranty Corp., said, “Deposit Guaranty sought in a merger partner one who would generate superior value for our shareholders. First American is a financial services provider of the future rather than a bank of the past. First American is further down the road with customer information systems and distribution management than most banks in the country, and we concluded that the fit of the two organizations was excellent. Deposit Guaranty believes both shareholder groups will win in this merger as the enhanced revenue and lower costs of distribution occur in the future.
“We are also excited about the prospects of bringing new value to our customers through the expertise and capabilities First American has in serving small businesses and providing services such as financial planning and investments to customers.”
First American is the top small business lender in Tennessee and ranks second in the nation in annuities sales per dollar of deposits.
Dennis C. Bottorff, chairman and CEO of First American, said, “First American and Deposit Guaranty share common operating philosophies and a very strong commitment to our clients, shareholders, employees and communities. Through this agreement, we are leveraging the joint strengths of First American and Deposit Guaranty to build one of the nation’s best-performing financial institutions. We look forward to combining the strengths of the two institutions to create value, increase revenue and decrease distribution costs in the combined company.”
As part of the transaction, First American will create a $15 million charitable foundation dedicated to supporting the communities Deposit Guaranty services. A board of trustees, led by the chief executive officer of Deposit Guaranty, will administer the foundation.
Robinson will become chief operating officer of First American Corporation, with responsibility for the company’s General Bank (retail) and Corporate Bank operations. Howard L. McMillan Jr., president and chief operating officer of Deposit Guaranty, will be chairman of Deposit Guaranty’s operations. Five members of the current Deposit Guaranty board of directors will become directors of First American Corporation.
Under the terms of the agreement, Deposit Guaranty shareholders will receive, in a tax-free exchange, 1.17 shares of First American common stock for each share of Deposit Guaranty common stock. The value of the transaction is $2.7 billion and represents an exchange value of $64.06 for each common share of Deposit Guaranty stock, based on First American’s closing share price of $54.75 on Friday, Dec. 5. The merger will be accounted for as a pooling-of-interests and is expected to be neutral to earnings in 1998 and 6 percent accretive to First American’s consensus estimate in 1999.
The combined company will have assets of approximately $17.4 billion, deposits of $13 billion and stockholders’ equity of $1.65 billion. It will operate in Tennessee, Mississippi, Louisiana, Arkansas, Virginia and Kentucky and will be the fourth largest financial services institution in the Mid-South region in total assets. Subject to regulatory and stockholder approvals, the transaction is expected to close in the second quarter of 1998.
Deposit Guaranty is a $6.8 billion institution with 171 offices and 195 ATMs in its three-state operating area of Mississippi, Arkansas and Louisiana. Headquartered in Jackson, Miss., the company has approximately 3,500 employees. The corporation is the parent company of Deposit Guaranty National Bank and has mortgage offices in Oklahoma, Nebraska, Texas, Indiana and Iowa. Deposit Guaranty has previously announced plans to acquire Victory Bancshares, with total assets of $118 million, in Memphis, Tenn., which is scheduled to close during the first quarter of 1998.
First American Corporation is a $10.6 billion institution with 169 offices and 440 ATMs in Tennessee, Kentucky and Virginia. First American has approximately 4,200 employees. The corporation is the parent company of First American National Bank, First American Federal Savings Bank and First American Enterprises Inc. Through its 98 percent ownership of INVEST, the company has approximately 1,900 representatives selling mutual funds, annuities and other investment and insurance products in more than 1,000 investment centers throughout the United States.
To the extent that statements in this report relate to the plans, objectives or future performance of First American Corporation and Deposit Guaranty Corp., these statements may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on Management’s current expectations and the current economic environment. Actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties. Additional discussion of factors affecting First American’s or Deposit Guaranty’s business and prospects is contained in the company’s periodic filings with the Securities and Exchange Commission.
FIRST AMERICAN CORPORATION
DEPOSIT GUARANTY CORPORATION
December 8, 1997
Deal Summary Fact Sheet
— Pooling of interests
— Tax-free exchange
— Definitive agreement signed
— Due diligence completed
— 1.17 shares of First American common stock for each common share of
— 19.9% stock option from DEP to FATN
— Deposit Guaranty has the right to terminate the agreement if First
American’s stock price on average for the 20 business days preceding
— (1) Declines by more than 25% or
— (2) Declines by more than 20% and more than 15% relative to a
specified bank index
PRICING: (Based on closing share prices as of Dec. 5, 1997)
— FATN closing price (12/5/97): $54.75
— DEP closing price (12/5/97): $52.38
— Purchase price: $2.7 billion
— Purchase price per share: $64.06
— Price/Book: 4.19x
— Price/1998 EPS consensus: 25.33x
— Pricing compares favorably to recent transactions based on contribution
analysis, implied ROA, price-to-earnings adjusted for synergies and
— Expected to close in the second quarter of 1998
— Subject to shareholder (both organizations) and regulatory approvals
— Aids in FATN becoming one of the highest performing, most highly valued
companies in the industry
— Neutral to earnings in 1998; 6% accretive in 1999 (based on IBES
consensus estimates); 10% if earnings from excess capital are included
— 250 – 300 basis point expected increase in ROE
— Expected improvement in productivity
— Opportunity to increase net interest margin
— Low cost source of funds in Mississippi, Louisiana and Arkansas markets
— 32.5% expected synergies (25% cost, 7.5% revenue); fully phased in
— Broadened geographic presence
— Opportunity to capitalize on FATN customer profitability and
distribution management technologies
FIRST AMERICAN CORPORATION/DEPOSIT GUARANTY CORPORATION
FIRST AMERICAN DEPOSIT GUARANTY
PROFILE: $10.6 billion $6.8 billion
Financial services Financial services company
Headquartered in Headquartered in
Nashville, Tenn. Jackson, Miss.
Dennis C. Bottorff, E.B. Robinson Jr.,
Chairman & CEO Chairman & CEO
Nasdaq SYMBOL: FATN NYSE SYMBOL: DEP
Stock price: $54.75 Stock price: $52.38 on
on 12/5/97; up 12/5/97; up 69.65 percent
90 percent from $28.81 from $30.88 on 12/31/96
HOLDINGS: First American National Bank Deposit Guaranty
First American Federal Deposit Guaranty Mortgage
Savings Bank Company
First American Enterprises
INVEST Financial Corp.
(98 percent ownership)
SSI Group (41 percent
GROWTH (9/30/96 to 9/30/97):
Revenue: 9 percent growth Revenue: 15 percent growth
Net income: 15 percent Net income: 5.7 percent
Avg. loans: 5.5 percent Avg. loans: 11.2 percent
Deposits: 4.3 percent growth Deposits: 12.7 percent
Loans: 5.5 percent growth Loans: 14.8 percent
* includes acquisitions
PERFORMANCE (3rd Qtr. 1997):
Net income of $37.2 million Net income of
or $.63 per share $23.3 million or $.57 per
Quarterly cash dividend Quarterly cash dividend
$.20 per share $.20 per share