Union First Market Bankshares and StellarOne to Merge in $445 Million Deal

Andrew Klips |

Banks Union First Market Bankshares Corp. (UBSH) and StellarOne Corporation (STEL) have agreed to merge, creating the largest community bank in Virginia. Per the deal, Union First will buy StellarOne for approximately $445 million in stock, representing one of the biggest bank deals so far in 2013.

Per the agreement, each share of StellarOne will be swapped for 0.9739 shares of Union First, implying a share value of $19.50 and a deal value of $445.1 million, based on Union First’s closing price on Friday of $20.02.

StellarOne is based in Charlottesville, Virginia with branches throughout the western side of the state. The combined company will take the Union First name and be headquartered in Richmond, Virgina, currently Union First’s hometown.

The combined company will have total assets of $7.1 billion, deposits of $5.8 billion and loans of $5.2 billion, according the latest financials. Combined, there will be 146 branches of the bank (fifth most in the state) in all of Virginia’s major markets.

Union First was created in 2010 through the merger of Union Bank and Trust Co. and First Market Bank.

Union First expects the merger to be accretive to earnings in 2014 and beyond. The deal is expected to be closed in January 2014, subject to all approvals. Both boards have approved the transaction.

"We are excited about the opportunity to bring our organizations together and establish the next great Virginia bank. We have long believed that the combination of Union and StellarOne would be powerful,” said G. William Beale, chief executive of Union First.

Beale will retain his position as top executive of the merged company. The board of directors will grow to 19 members, comprised of 11 members for the current Union First board and 8 members from the StellarOne board with current StellarOne chairman Raymond Smoot, Jr. serving as chairman. Ronald Hicks, the current chairman of the Union First board will become vice chairman of the combined company.

The only bigger bank deals so far this year were United Bankshares Inc. (UBSI) agreeing to buy Virginia Commerce Bankcorp Inc. (VCBI) for $495 million in April and Chile-based Banco de Credito e Inversiones SA saying in January that it would spend $883 million for City National Bank of Florida from Spain-based Bankia SA.

With ultra-low interest rates and tight lending policies, community banks have been struggling to expand in recent years.

Shares of UBSH initially gapped down to around $19 with the merger news, but have recovered a portion of the losses to be trading down by about 1.5 percent at $19.75 with about one hour to go in the trading day. Shares of STEL have surged more than 16 percent to trade around $19 each.

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Companies

Symbol Name Price Change % Volume
MSI Motorola Solutions Inc. 76.28 -0.93 -1.20 1,806,338
UBSH Union Bankshares Corporation 26.77 0.17 0.64 234,210
UBSI United Bankshares Inc. 37.67 0.60 1.62 350,727

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