Yadkin sale may be on 2017 horizon, bankers say
* Possible asking price is USD 30 a share
* Numerous potential buyers
Yadkin Financial (NYSE:YDKN), North Carolina’s largest community bank, may be in a position to sell once it integrates its recent acquisition of NewBridge Bancorp, said two industry bankers and an analyst.
Among reasons they cited are the bank's attractive North Carolina footprint, a shrinking number of area targets and a possible exit by its private equity investors.
The Raleigh-based institution reached USD 7.4bn of assets when its USD 450m stock deal with NewBridge closed on 1 March.
An industry banker noted Yadkin has now reached critical mass with its acquisitions and has been cutting costs. CEO Scott Custer, who has rolled up six banks during his tenure, is good at buying companies but may want to sell as those opportunities dry up, this banker said. Yadkin is also approaching USD 10bn in assets, where higher regulatory costs kick in, the banker added.
Stephen Scouten, an analyst with Sandler O’Neill, said he thinks Yadkin would sell if a suitor offered at least USD 30 a share. That price would reflect more than 2.2x times tangible book, a level recently seen in only a few Florida deals.
“Maybe they have to integrate NewBridge first and clean it up for someone to want to offer them the right price in their mind,” Scouten said. “It could be a 2017 event. But I also wouldn’t be surprised if you saw something between now and September before they do the (systems) conversion with NewBridge.“
Scouten noted that Yadkin has two private equity investors, Stone Point Capital and Lightyear Capital, who may be interested in an exit. Both invested in Piedmont Community Bank Holdings in September 2009 and received Yadkin shares in July 2014 when the two banks combined in a merger of equals, according to SEC filings.
Both firms have representatives on Yadkin’s board although each now has less than a 5% stake.
Yadkin’s top executives would see a large payday from a rabbi trust in the event of a “change in control.” The trust, set up in connection with the Piedmont deal, will otherwise vest at the end of 2018.
A second industry banker said it would be highly unusual for Yadkin to sell so soon after the NewBridge deal, which almost doubled the institution’s size.
Such a deal would raise red flags and most buyers would prefer to see Yadkin extract the synergies promised when the deal was announced, this banker said. A sale might eventually happen as Yadkin contemplates the USD 10bn asset mark, he said.
Jeff Davis, a managing director with Mercer Capital, agreed. While North Carolina’s thriving markets make Yadkin an appealing target, he said it’s more likely that Yadkin “let’s the dust settle” for a year with the NewBridge acquisition and then makes one more acquisition before selling itself.
Yadkin is an “acquirer of choice” for many community banks, who would take Yadkin stock in the hope of getting a “double dip” when Yadkin eventually sells, Davis said.
With top positions in North Carolina's top four metro markets, Custer recently said Yadkin is happy with its current situation. “I don’t know that we have to go do a lot more acquiring to realize the benefits of scale that we have today,” he said at the Gulf South Bank Conference in New Orleans on 3 May. He said Yadkin will probably spend the rest of 2016 “getting NewBridge right.”
Yadkin did not respond to subsequent requests for comment on the possibility of a sale.
The first banker said there are only a handful of buyers that would be able to pay the price Yadkin probably wants and have a multiple that would not be dilutive to their own shares. Bank of the Ozarks (NASDAQ:OZRK), United Community Banks (NASDAQ:UCBI) and IberiaBank (NASDAQ:IBKC) are potential contenders, the first banker said.
United has been actively acquiring in South Carolina and has a small North Carolina presence, and Yadkin would fit the focus outside of its home state of Georgia, the first banker said. Iberia, he added, has traditionally been a deep South bank and may want to increase its limited presence in the Carolinas.
In January, BNC Bancorp (NASDAQ:BNCN) CEO Rick Callicutt said he looked at a deal with Yadkin, which was slightly smaller than it at the time, but decided it was not the right transaction.
Scouten said he thinks buyers could include South Carolina-based South State (NASDAQ:SSB) and Memphis-based First Horizon National (NYSE:FHN), with Fifth Third Bancorp (NASDAQ:FITB) a possibility as well.
Davis agreed that South State is a good candidate. He also said a possible merger with Charlotte, North Carolina-based Park Sterling (NASDAQ:PSTB), which is smaller than Yadkin, would be interesting. Such a combination would beef up the bank’s presence in Charlotte and add Richmond to the mix.
Yadkin used Keefe Bruyette & Woods as its financial advisor on NewBridge, while Skadden Arps Slate Meagher & Flom served as its lawyers.