Home BancShares Defends Texas Acquisition Price

Home BancShares in Conway, Arkansas, on Thursday pushed back against allegations that it omitted critical information from the proxy filing detailing its $919 million contract for Happy Bancshares, based in Canyon, Texas.

In a supplemental filing with the Securities and Exchange Commission, the $17.8 billion asset holding company for Centennial Bank disclosed a series of charts compiled by its investment bankers illustrating the valuations of comparable companies in Texas. and in the country, as well as the consideration paid in certain recent transactions.

Home also disclosed a projection indicating that Happy Bancshares, a $6.4 billion asset, has the potential to generate adjusted net income totaling $83.4 million in 2026, 39% more than in 2020.

Last month, a disgruntled investor filed a lawsuit in the U.S. District Court for the Southern District of New York, seeking more information about how Home Bancshares arrived at the $919 million price tag.

Pate Pearson alleged disclosure deficiencies in Home’s original 179-page proxy, filed with the SEC on October 22, “[deprived] applicant for the information necessary to make an intelligent, enlightened and rational decision” as to the merits of the transaction.

The implied price per share of $47.24 is approximately 166% of Happy’s tangible book value per share. In bank deals announced through September this year, the median sale price equals 151.8% of the seller’s tangible equity, according to data from S&P Global.

In the current events report it filed on Thursday, Home called Pearson’s lawsuit “without merit” and denied “that further disclosure was or is required.” Home said it chose to release additional information specifically to avoid “annoyance, potential expense and delay” associated with fighting Pearson’s court action.

Jack Siegal, partner and commercial litigation attorney at McGlinchey Stafford, said Home’s additional filing on Thursday would likely be enough to blunt Pearson’s suit, which is asking the court to block a Home shareholder vote scheduled for Dec. 15.

“What more does this plaintiff have to complain about,” Siegal said Thursday. “If the numbers weren’t favourable,” he added, Home Bancshares “probably wouldn’t” have released additional information.

According to Jason Vigna, a partner at Mintz Levin, anti-merger lawsuits involving plaintiffs claiming they lack adequate disclosure are common in transactions with consideration over $100 million. Such lawsuits had primarily been filed in Delaware state courts until 2016, when a judge ruling on a merger opposition lawsuit involving Zillow Inc.’s acquisition of Trulia Inc. said that such lawsuits “seldom bring any real benefit to shareholders”. Since then, the venue has moved to federal courts, Vigna said.

Evan Smith, Pearson’s attorney, did not immediately respond to a reporter’s request for comment.

Home Bancshares announced the acquisition of Happy in September. Home has been an active acquirer under Chairman and CEO John Allison, but the deal for Happy State Bank would be its first bank acquisition in Texas.

Richard L. Militello