GAB announces merger with Kentucky bank corporation

German American Bancorp, Inc. and Citizens Union Bancorp of Shelbyville, Inc. (CUB) announced that they have entered into a definitive agreement to merge CUB into German American. Upon completion of the transaction, CUB’s subsidiary bank, Citizens Union Bank of Shelbyville, Inc., will be merged into German American’s subsidiary bank, German American Bank. 

Under terms of the definitive agreement, CUB common shareholders will receive a fixed exchange ratio of 0.7739 shares of German American common stock for each share of CUB in a tax-free exchange, and a cash payment of $13.44 per CUB share. Based on the number of CUB common shares expected to be outstanding at closing, German American would issue approximately 2.9 million shares of its common stock, and pay approximately $49.8 million cash, for all of the issued and outstanding common shares of CUB. 

German American has also agreed, upon completion of the merger, to make a cash payment in cancellation of CUB’s unexercised stock options, which payment is currently estimated to total approximately $0.9 million, if none of the outstanding options were to be exercised before closing. Based upon the $35.99 per share volume-weighted average price of German American’s common shares over the 10-day trading period ended September 17, 2021, the transaction has an aggregate indicated value of approximately $154.0 million, with the total merger consideration being split between stock and cash on an approximate 67:33 basis. 

Upon consummation of the transaction, German American and CUB will have combined assets of approximately $6.4 billion, based upon June 30, 2021 financials. Giving effect to the merger today, the combined company would have 83 banking offices in 19 counties in Indiana and 15 counties in Kentucky. 

“This merger with Citizens Union represents another important, strategic opportunity for German Americans, and enhances our presence in the vibrant Louisville, Kentucky metropolitan market area,” Mark A. Schroeder, Chairman and CEO of German American, stated. “Our combined operations in the broader Louisville market area places us in a top 10 market share position in the largest metropolitan market area in the Commonwealth of Kentucky. CUB has built a solid community banking franchise in each of the Kentucky markets they serve giving German American an opportunity to provide our extensive offerings of banking, insurance and investment products and services to CUB’s current and prospective clients. We are excited to welcome the Citizens Union customers, employees, communities and shareholders to the German American family.” 

Schroeder continued, “We expect that this strategic transaction will be materially accretive to German American’s earnings per share during the twelve months following completion of the transaction, and will have a relatively quick tangible book value earn back period of less than three years. German American’s pro forma capital ratios will continue to significantly exceed regulatory well-capitalized levels, enabling us to continue to take advantage of future growth opportunities throughout our markets in Kentucky, as well as within and adjacent to our existing Southern Indiana market area.” 

“This strategic partnership with German American, one of the best performing community banking organizations in the nation, will enable us to deepen and broaden the financial services offerings we provide in all our markets. Strategically and culturally, we are exceptionally well aligned with German American’s commitment to their community banking business model centered on delivering exceptional customer service and on a willingness to invest in the local communities they serve,” David M. Bowling, Chief Executive Officer of CUB, stated. “Gerrman American’s reputation, financial strength and operational capabilities will provide tremendous value to our customers, employees, communities and shareholders.” 

The transaction is expected to close in the first quarter of 2022. Completion of the transaction is subject to approval by regulatory authorities and by holders of a majority of the issued and outstanding common shares of CUB, as well as certain other closing conditions. In connection with the definitive agreement, German American entered into a voting agreement with each of the members of the CUB board of directors and with certain other CUB shareholders, who collectively hold approximately 60% of the outstanding shares of CUB common stock. Subject to the terms and conditions of the voting agreement, the shareholders who are parties to the agreement have agreed to vote their shares in favor of the transactions contemplated by the definitive agreement.

Piper Sandler & Co. served as financial advisor on the transaction to German American and Dentons Bingham Greenebaum LLP served as legal counsel.

ProBank Austin served as financial advisor on the transaction to CUB and Frost Brown Todd LLC served as legal advisor.