Texas Banks Mutually End $3.07B Merger Over Coronavirus

By Benjamin Horney
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Law360 (May 26, 2020, 10:51 AM EDT) -- Texas Capital and Independent Bank Group have decided to terminate their planned $3.07 billion stock merger due to market turmoil caused by the coronavirus, the companies said Tuesday, marking the latest in a series of significant transactions to be called off because of the pandemic.

The deal stood to create a top Texas-based regional banking player with $48 billion in assets and a market capitalization of roughly $5.5 billion. On Tuesday, the companies said they mutually determined that it was in the best interests of both sides to call the transaction off. The boards of directors for both Texas Capital Bancshares Inc. and Independent Bank Group have approved the decision.

"While both companies believed in the benefits of the proposed transaction when it was announced, we mutually concluded after careful consideration that, given the significant uncertainty caused by the COVID-19 pandemic and the resulting economic and market environment, it would not be prudent to continue to pursue the combination and integration of our companies at this time," said David R. Brooks, chairman and CEO for Independent Bank Group. 

Brooks added: "This decision allows us to dedicate our focus and resources toward ensuring the strength of our business, serving the interests of our customers and protecting the health and safety of our employees during these unprecedented times."

As a result of the mutual decision, neither side will pay any termination fee.

Larry Helm, chairman for Texas Capital, said that "Texas Capital Bank remains focused on supporting the health and safety of our colleagues and meeting all our clients' needs during these challenging times and for many years thereafter."

"As a result of our significant multi-year investments, healthy balance sheet, ability to recruit and foster the best talent and history of driving strong results, Texas Capital Bank is well positioned to continue to execute against a standalone strategy," Helm added.

The agreement, inked in December, was billed as a merger of equals. Texas Capital was advised by Sullivan & Cromwell LLP, while Independent Bank Group was guided by Wachtell Lipton Rosen & Katz. Under the terms of the transaction, each Texas Capital share was set to be swapped for 1.03 shares of Independent Bank Group.

The two banking businesses are not nearly the first entities to nix a deal in the wake of the pandemic, although not every termination is mutual. Last week, cybersecurity firm Forescout Technologies Inc. sued Advent International over the latter's decision not to close its planned $1.9 billion takeover of the former.

In April, meanwhile, medical device maker Alphatec Holdings Inc. notified EOS Imaging SA that it would not finalize its nearly $122 million deal for the orthopedic medical imaging and software company, saying that disruption caused by the coronavirus had resulted in a material adverse effect.

--Additional reporting by Chelsea Naso. Editing by Alyssa Miller.

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