How Equity in Kan. learned American State was in play

Equity Banchshares in Wichita, Kan., didn’t waste time getting the S-4 out for its pending acquisition of American State Bancshares in Wichita.

The $73.6 million deal, announced last month, would bolster the $4.2 billion-asset Equity’s operations in its home state.

First, a review of the acquisition’s terms:

The deal, which is expected to close in early October, priced the $779 million-asset American State at 111% of its tangible book value. The deal is expected to be 15.9% accretive to Equity’s 2022 earnings per share, excluding merger-related expenses.

It should take less than three years for Equity to earn back an anticipated 3.7% dilution to its tangible book value.

Equity plans to cut about 34% of American State’s annual operating expenses, or roughly $5.8 million. The company expects to incur $11.2 million of merger-related expenses.

Here’s what we learned from Equity’s recent regulatory filing:

• American State’s investment bank contacted Equity and another, unnamed bank in February to gauge interest in a transaction.
• Equity's initial offer, submitted on March 25, included an all-stock option that valued American State at $84.1 million and an option with 20% cash valued at $85.6 million. Equity adjusted its offer after conducting more due diligence.
• The other company, which was publicly traded, pitched an all-stock deal, along with a one-time cash dividend, but it "had a lower value than Equity's initial proposal" and American State's board thought "it offered less upside potential."
• Equity sent the first draft of the merger agreement to American State on May 5.
• American State's board unanimously approved the merger on May 14. It was announced three days later.