Bank First got second shot to buy Denmark Bancshares

Patience paid off for Bank First in Manitowoc, Wis. 

The $2.9 billion-asset company made an initial overture to buy Denmark Bancshares in February 2020, roughly two years before it reached an agreement to buy the Denmark, Wis., company for $119.5 million. 

The initial effort was detailed in a regulatory filing associated with the pending acquisition, which was announced in January and is expected to close in the third quarter. 

Bank First’s first proposal had an implied purchase price of $109 million, with 80% of the consideration consisting of stock. The board of the $688 million-asset Denmark rejected the offer a month later, citing a desire to pursue its own organic growth and acquisitions.

Denmark found M&A to be easier said than done. It attempted over the second half of 2020 to merge with a similarly sized institution but the other bank decided in January 2021 to end discussions.

By October 2021, Denmark’s board had decided to explore selling. It hired an investment bank, which contacted three potential acquirers, including Bank First, a month later. 

Bank First and one other bank signed confidentiality agreements and were given access to non-public information to learn about Denmark’s loans and deposits, credit quality, vendor contracts and operating expenses. 

Bank First sent Denmark a non-binding expression of interest on Nov. 23 that proposed $119.5 million in cash and stock, or roughly 10% more than what it pitched the previous year. The other potential suitor did not make an offer. 

Bank First and Denmark began exclusive talks shortly thereafter, and an initial draft of the merger agreement was circulated on Dec. 17. 

Denmark’s due diligence included a review of Bank First’s strategic plan and future growth prospects, its integration plan and financial performance. The research also looked at Bank First’s strategic plans for Denmark’s markets, shareholder liquidity, existing business lines and potential new lines of business. 

Denmark’s board unanimously approved the merger on Jan. 14. Bank First gave its unanimous approval at a meeting four days later, allowing the banks to make a public announcement. 

The deal priced Denmark as 175% of its tangible book value. Bank First will cut half of Denmark’s annual noninterest expenses. The company expects to incur $10.7 million in merger-related expenses.

The deal should be 4.9% accretive to Bank First’s 2022 earnings per share. It should take less than three years for the company to earn back an estimated 3.3% dilution to its tangible book value.

The regulatory filing also disclosed that Bank First will terminate the employment agreement for Scott Thompson, Denmark’s chairman, president and CEO, and pay him a lump sum of $1.4 million. Thompson agreed to a two-year confidentiality and non-solicitation arrangement.