Magazine article American Banker

Fourth-of-July Merger Fireworks: Union Planters Paying $361 Million for Grenada Sunburst of Mississippi

Magazine article American Banker

Fourth-of-July Merger Fireworks: Union Planters Paying $361 Million for Grenada Sunburst of Mississippi

Article excerpt

Union Planters Corp. announced Friday the biggest acquisition in its history, saying it had signed a definitive agreement to acquire Grenada Sunburst System Corp. of Mississippi.

Union Planters said it would pay $361 million in stock for Grenada Sunburst, the thirdlargest Mississippi-based banking company, with assets of $2.5 billion and 127 offices in Mississippi and Louisiana.

The price, based on Union Planters' Thursday close of $26.75 a share, represents two times Grenada Sunburst's book value and 14 times its trailing 12-month earnings.

Union Planters' stock fell Friday $1.75, to $25. Grenada Sunburst soared $6.25, to $32.50.

Slow Growth Noted

Analysts were surprised that Union Planters, which is based in Memphis and has $6.7 billion of assets, had agreed to pay such a premium for a bank in Mississippi, where economic growth lags behind that of most other states in the region.

"It demonstrates that a Mississippi bank can command a healthy acquisition multiple," said Kathryn Bissette, with Sterne, Agee & Leach Inc. in Atlanta.

Indeed, several Mississippi bank stocks rose Friday on the news. Deposit Guaranty Corp., Jackson, the state's largest, which is considered a proxy for Mississippi bank stocks in general, rose $1.75, to $31.25.

Union Planters said it expects to close the deal by yearend, pending regulatory and shareholder approvals.

But there may be one complication: Grenada Sunburst currently has a "needs to improve" rating under the Community Reinvestment Act, which requires banks to serve all customer segments in their market. …

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