First Citizens to buy Entegra Bank

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First Citizens Bank & Trust Co. and Entegra Bank have reached an agreement that will allow First Citizens to buy Entegra Bank.

First Citizens Bank & Trust Co. and Entegra Financial Corp. on Wednesday announced the signing of a merger agreement.

The announcement was made jointly by Frank B. Holding Jr., chairman and CEO of First Citizens Bank, and Roger Plemens, president and CEO of Entegra. First Citizens, with numerous locations in the Midlands, is based in Raleigh, N.C., and Entegra is headquartered in Franklin, N.C.

The agreement has been approved by the boards of directors of both companies, according to a news release. The transaction is anticipated to close during the second half of 2019, subject to the receipt of regulatory approvals, the approval of Entegra's shareholders and the satisfaction of other customary closing conditions, the release said.

Under the terms of the agreement, cash consideration of $30.18 per share will be paid to the shareholders of Entegra for each share of its common stock and for each restricted stock unit after conversion to common stock, each Entegra option will be canceled and each option holder will receive a cash payment and no consideration will be paid to First Citizens Bank or its affiliates as a result of their ownership of shares of Entegra’s common stock, according to the news release.

On the day of the announcement, First Citizens Bank and its affiliates owned approximately 1.56% of Entegra’s outstanding common stock. The total transaction value, including termination fee, is anticipated to be approximately $219.8 million, according to the release.

The purchase negated a deal announced earlier this year in which SmartFinancial Inc. had agreed to buy Entegra for about $158 million.

On Jan. 15, Entegra announced it had entered into a definitive agreement to combine with SmartFinancial in a “strategic merger of equals,” in which each share of Entegra common stock would be converted into 1.215 shares of SmartFinancial common stock, according to the release. Based on the closing price of SmartFinancial’s common stock of $18.40 on Jan. 14, this implied a transaction value of $22.36 per share, or approximately $158.2 million, the news release said.

After that announcement, First Citizens Bank approached Entegra and its advisers with the higher price to acquire the company. Under the terms of its definitive agreement with SmartFinancial, the board of directors of Entegra exercised its right to enter into discussions with First Citizens Bank.

“Ultimately, the board determined that the cash consideration offer of $30.18 from First Citizens Bank was a superior proposal to the agreement with SmartFinancial, and pursuant to its fiduciary duties and, as permitted under its agreement with SmartFinancial, entered into an agreement with First Citizens Bank,” the release said.

Under the terms of the First Citizens Bank agreement with Entegra, First Citizens Bank will pay a termination fee of $6.4 million to SmartFinancial on behalf of Entegra, which Entegra was obligated to pay under its agreement with SmartFinancial, according to the release.

As of Dec. 31, Entegra reported $1.6 billion in consolidated assets, $1.2 billion in deposits and $1.1 billion in loans, the release said.

Entegra Bank opened in 1922 and is a state-chartered, full-service commercial bank with 18 offices and two loan production offices throughout Western North Carolina, Upstate South Carolina and North Georgia, the release said.

Customers should bank as they normally do at their existing branches, which will become part of First Citizens upon the completion of the merger, the news release said.

Sandler O’Neill + Partners L.P. acted as financial adviser to Entegra in connection with this transaction. Raleigh-based Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan LLP represented First Citizens in the transaction; Hunton Andrews Kurth LLP represented Entegra.