Bear State Buy Poised To Take Assets to $1.5B

by George Waldon  on Monday, Jun. 9, 2014 12:00 am  

Source: Federal Deposit Insurance Corp. All dollars in thousands

Bear State Financial Inc. of Harrison, recently renamed from First Federal Bancshares of Arkansas, is days away from almost tripling its size with the pending acquisition of First National Security Co. of Hot Springs.

Expected to close before Bear State’s June 27 annual shareholders meeting, the transaction will send the company’s total assets from $569 million to more than $1.5 billion.

It’s a rare day when the smaller company buys the larger one. It’s an extremely rare day when the smaller, acquiring firm also emerged from serious financial travails not so long ago.

Addressing regulatory concerns that Bear State should have sufficient operational capabilities and safeguards in place to manage a much larger organization resulted in a protracted approval process.

New money and management through the Bear State investors in 2011 stabilized First Federal. An $11.5 million discount on TARP debt was part of the recapitalization and change of control equation.

The value of the cash-stock combo buy of First National Security has dipped slightly to about $122.2 million, with Bear State shares trading at about $7.76. When the deal was announced last July, the stock price was $7.90.

The estimated purchase price as a multiple of tangible equity is 1.37, based on $7.90 per share and First National Security’s projected book value at closing.

The transaction is split between $74 million cash and more than 6.2 million shares of Bear State worth about $48.5 million these days.

As part of the acquisition, three members of the First National Security board of directors will be joining the Bear State board: John Hendrix, 77, chairman and largest shareholder in First National Security; Dan Horton, 72, chief executive officer of First National Security; and Ian Vaughn, 37, Hendrix’s stepson and a director at FNS’s First National Bank of Hot Springs. The company also owns Heritage Bank of Jonesboro.

In the aftermath of the merger, Hendrix is expected to hold a 9.5 percent stake in Bear State, more than 2.7 million shares worth about $21.1 million today.

First National Security Investors Stake* Merger Value**
John H. Hendrix 56.0% $53,755,523
Karmen Marie Hendrix 7.5% $9,270,601
Kristen Lee Hendrix Hayes 7.3% $8,995,883
Anne Leslie Hendrix Wood 7.0% $8,634,170
Michael Klein 1.9% $2,289,320
Randell J. Wright 0.6% $649,022
 *As of Dec. 31    
**Based on $7.90 per share price for Bear State     
Source: Securities & Exchange Commission filings  



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