Why Glacier Bancorp is paying a premium for Altabancorp

Glacier Bancorp is paying top dollar for what will become its biggest acquisition to date. But the Kalispell, Montana, company’s CEO says the deal for Altabancorp is worth the price, as it will strengthen Glacier’s foothold in coveted Utah at a time when other states in the West are recovering slowly from the pandemic.

“This is an exceptional opportunity to solidify Glacier’s presence in the booming Utah market by partnering with the largest community bank in the state,” Randy Chesler, Glacier’s president and CEO, said in announcing the deal after markets closed Tuesday. “We have been keenly focused on building our presence in Utah and this opportunity checks all the boxes.”

The $19.8 billion-asset Glacier agreed to pay a hefty premium to cinch the deal with the $3.5 billion-asset Alta, of American Fork, Utah. At a price of $933.5 million in stock, the deal values each Altabancorp share at about $49, which represents a 15% premium to the company’s pre-announcement closing price and 270% of tangible book value. In the first quarter of this year, sellers were fetching roughly 150% of tangible book value.

Chesler, however, said Utah is home to the fastest-growing economy in Glacier’s eight-state western footprint, based on S&P Global data. This is driven by relatively low taxes, the migraton of new businesses to the state and steady population growth. The state recorded the second-highest population growth in the United States over the past decade, according to U.S. Census Bureau data.

“Utah is hands-down the fastest growth market in our footprint,” Chesler said during a call with analysts Wednesday. “It gives us scale in a market we very much wanted to grow in.”

Should Glacier close the deal in the fourth quarter as planned, it would mark the largest bank takeout in Utah since 2000 and it would become by far Glacier’s largest acquisition over a long M&A history.

Altabancorp would be Glacier’s 24th acquisition since 2000 and its seventh in the past five years. It would also be Glacier’s second acquisition of a Utah-based bank in the past two years. It closed the acquisition of First Community Bank based in Layton, Utah, in 2019.

Utah would become Glacier’s second-largest market — it is its smallest now — representing 17% of loans, up from 4%. Montana remains its biggest market.

Within that context, Chesler said Altabancorp, the parent of Altabank, commanded a higher price tag because it is the only bank headquartered in Utah — as well as neighboring Idaho, Wyoming, Arizona and Nevada — with total assets between $3 billion and $10 billion. This gives it exceptional “scarcity value,” he said.

Chesler said that, with few community banks in Utah, the market is dominated by large regional and national banks. He said there is demand for community banks’ local expertise and decision-making. Like other Glacier subsidiaries, Altabank will operate under its existing name. Glacier’s larger balance sheet will increase Altabank’s lending limits and help its commercial bankers pursue larger loan deals.

“We buy banks that are doing well, and our focus is to help them continue doing well,” Chesler said.

Analysts said that any sizable deal in Utah was bound to command a strong premium. They also noted Altabancorp is consistently profitable and posted strong, stable credit quality through the pandemic.

The deal “adds scale in one of the strongest economic footprints in the country,” and should be a “positive catalyst” for growth, said Jeff Rulis, an analyst with D.A. Davidson.

The acquisition would give Glacier 25 more branches in Utah, up from 10 now. More than 80% of the Utah population resides in the eight counties where the combined bank will have branches, Glacier said. Altabancorp had total loans of $1.8 billion and total deposits of $3.2 billion at the close of the first quarter.

Clacier said the deal would be immediately accretive to earnings per share, with 5.2% accretion in 2022, or 5.8% with fully realized cost savings next year. The buyer estimated savings will total 17.5% of Alta’s noninterest expense.

This transaction did not surprise analysts, given Glacier’s focus on Utah and that Alta’s largest shareholder group had pushed for a sale. Wednesday’s deal comes after months of wrangling between Altabancorp and the investor group, made up of members of the Gunther family.

The Gunthers’ involvement in Altabank stretches back to 1952, when the patriarch Orville Gunther acquired a stake in a predecessor institution, People’s State Bank of American Fork.

The company adopted the Altabank brand in 2019, after merging with the $303.9 million-asset Lewiston State Bank in Lewiston, Utah, in 2015 and the $143 million-asset Town and Country Bank in St. George, Utah, in 2017.

However, the Gunthers, who own about 31% of Altabancorp’s shares, gradually took issue with the management’s plans to expand outside Utah. In successive regulatory filings with the Securities and Exchange Commission, members of the Gunther family urged Altabancorp to explore its strategic options, including a sale.

“We met with the family … and I think all parties are aligned around this business combination being the best path forward,” Chesler said on the call.

Chesler said Glacier would focus in the near term on getting the Altabank deal closed. But he said Glacier will remain acquisitive and has its eyes open for future potential deals.

“The door is always open, and we are always having conversations,” he said.

John Reosti contributed to this story.

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