The pending sale of Cadence Bank to Houston, Texas-based Community Bancorp will result in the retention of the Cadence name, local bank branches and jobs, but the same executives who have come under fire recently for the downfall of the company appear to be on track to keep their positions, Community Bancorp”s president and chief executive officer said Wednesday.
During a press conference at Cadence Bank headquarters in Starkville, CBC President and Chief Executive Officer Paul Murphy Jr. said current Cadence executives most likely will stay in power after the sale is finalized by federal regulators and Cadence shareholders, but the role of the bank”s board of directors is still up for discussion.
“It is our hope and expectation that the management and leadership will stay in place,” Murphy said when asked if Cadence CEO Lewis Mallory Jr. and the board of directors will retain their positions after the sale. “We”ve got some work to do in terms of the board (of directors) and having them decide exactly what relationship they want to have. I would like the board to continue and remain as part of the company.”
“When you go through a process like this, which has just been decided, I don”t think I can speak for the board and say whether they”re all prepared to do that and on what basis, but they will have a warm invitation to continue,” he added. “It”s a terrific board of directors and community leaders and it”s my hope that we will find a structure that is attractive to them.”
Cadence on Wednesday terminated a prior sale agreement with Trustmark Bank and instead chose to go with Community Bancorp, or CBC, for a number of reasons, Mallory said.
First and foremost, under the agreement with CBC, Cadence shareholders will receive $2.50 in cash per Cadence common share. Trustmark only was offering roughly $2 per share in stock options, Mallory said.
“(The sale to CBC) was a better option for the shareholders,” Mallory said.
CBC has offered to purchase the $44 million of Cadence preferred stock issued to the U.S. Department of the Treasury under the Troubled Asset Relief Program, or TARP, for $38 million in cash. By comparison, Trustmark had offered to pay $30 million in cash, plus accrued and unpaid dividends, for Cadence preferred shares issued to the Treasury.
Also, with the sale to CBC, Cadence will be able to retain its name, its 125-year-old charter and its identity. While Trustmark executives acknowledged Cadence branches likely would have been closed and positions would have been cut if Trustmark purchased Cadence, Mallory said a selling point for CBC was the knowledge that business would go on as usual at banks in the Golden Triangle. Plus, Mallory said, CBC has raised equity capital commitments in excess of $900 million for the purpose of making investments in the U.S. banking sector, with a particular focus on community banks.
The purchase of Cadence Bank is CBC”s first venture into the community banking world, Murphy said. He acknowledged the fact that Cadence has faced “tough times” in recent years, but said CBC”s purchase of the bank would help both companies.
“Bringing new capital to the table and having an abundant supply of capital is what gets you through tough times,” Murphy said. “So, this will allow us to be strong and confident in our business plan, and go out knocking on doors and looking for new business. It really, very much, comes down to capital.”
Cadence will no longer be a publicly traded company if the sale is approved by federal regulators and shareholders. CBC is privately owned.
“We”ve got a proxy we have to get to the (Securities and Exchange Commission) for their review by the 18th of this month and, pending their review, we”ll move that out to our shareholders,” Mallory said. “Following that distribution to our shareholders, which will be in around 20 to 25 days, we”ll have a shareholders meeting and the shareholders will vote on the proposal.”
“I can”t speak for 3,500 shareholders, but I would hope the shareholders will find this favorable and I believe that they will,” he added.
The original agreement between Trustmark and Cadence was approved by both banks” boards of directors. Trustmark CEO Jerry Host on Wednesday said he was surprised to learn Cadence backed out of the deal. Trustmark received notice Wednesday morning Cadence was sending the $2 million termination fee, as outlined in the original agreement.
“In my 26 years being involved in banking and acquisitions, it”s the first time we”ve had someone who has signed a definitive agreement with two boards and then terminate that agreement,” Host said.
Host said the canceled deal won”t change Trustmark”s business practices.
“It”s not really going to change our plans as far as our desire to do financially sound acquisitions that are strategically sound from a financial status,” he said. “We constantly look at acquisition opportunities. We”ll continue to do that as Cadence takes a different direction.”
Starkville Mayor Parker Wiseman was pleased to see Murphy”s commitment to job retention in Starkville and the rest of the Golden Triangle, and told him so during a brief exchange before the press conference at Cadence Bank.
“Going forward with the potential to keep more jobs here, it”s all very positive,” Wiseman said.
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