South State to buy Atlantic Capital for $542 million

South State in Winter Haven, Fla., has agreed to buy Atlantic Capital Bancshares in Atlanta.

The $40.4 billion-asset South State said in a press release Friday that it will pay $542 million in stock for the $3.8 billion-asset Atlantic Capital. The deal, which is expected to close in early 2022, priced Atlantic Capital at 161% of its tangible book value.

Atlantic Capital has two branches, $3.3 billion of deposits and $2.3 billion of loans. South State will have $5 billion of deposits in the Atlanta area when the deal closes.

"Atlanta is a strategically important market for us, and this attractive, in-market transaction significantly expands our market share in one of the fastest growing cities in the country,” John Corbett, South State’s CEO, said in the release. “Atlantic Capital provides a high-growth fintech and payments platform and a seasoned team of Atlanta bankers with a proven record of success.”

Doug Williams, Atlantic Capital’s president and CEO, will serve as president of South State’s Atlanta banking group and head of corporate banking. Two Atlantic Capital directors will join South State’s board.

The transaction is expected to be 3% accretive to South State’s earnings per share. It should take two years for South State to earn back any dilution to its tangible book value.

South State plans to cut a third of Atlantic Capital’s annual noninterest expenses. It expects to incur $37 million of merger-related expenses.

"We see South State as a logical acquirer for the Atlantic Capital business given its focus on building out diversified revenue streams," Stephen Scouten, an analyst at Piper Sandler, said in a client note.

"The main strategy behind the deal is to gain further density in the fast-growing Atlanta MSA, leverage Atlantic Capital's corporate banking experience, and capitalize on [the seller's] growing fintech and payments businesses," Scouten added.

Raymond James and Davis Polk & Wardwell advised South State. J.P. Morgan Securities, Sullivan & Cromwell and Troutman Pepper Hamilton Sanders advised Atlantic Capital.