Zions Bancorp, which operates in eight Western states, said Wednesday that it agreed to purchase Amegy Bancorp, the third-largest independent commercial bank in Texas, for $1.7 billion in cash and stock in a move to enter the Texas market.
Under terms of the agreement, Amegy shareholders will get a combination of cash and stock valued at $23.32 for each Amegy share, a 1.5 percent premium over Tuesday’s closing price. Amegy shares have risen in recent days on takeover speculation.
The deal is subject to the approval of Amegy’s shareholders and banking regulators, and is expected to close during the fourth quarter of 2005.
Amegy will continue to operate as a separate company under its current brand name and management team. After the deal closes, one Amegy director will be nominated for election onto Zions’ board. Paul Murphy will remain chief executive officer at Amegy Bank, and the company said all executive management of Amegy have agreed to remain at the bank as well.
“We will keep our name, our management, our board and even our charter,” Murphy said in a statement. “We will continue to make loan decisions locally. We have a new partner in Zions that will preserve the heritage of community banking with the efficiencies of a large company.”
Under the proposed deal, Amegy shareholders will have the right to choose cash or Zions common stock, equal to $8.50 plus 0.2020 Zions shares. Zions said the total purchase price consists of about $600 million in cash and about 14.25 million Zions shares, prior to any outstanding options.
The transaction is expected to add to Zions’ earnings per share beginning in 2007 and is forecast to provide an internal rate of return of about 14 percent.
Zions said it will fund the cash component of the purchase price with a combination of hybrid and subordinated debt securities. In addition, Amegy said it will raise its quarterly dividend to 11 cents per share to bring it in line with Zions’ dividend policy.
Zions Utah Bancorp, which operates about 400 bank branches in eight Western states under such names as Nevada State Bank and California Bank & Trust, posted 2004 earnings of $406 million on sales of $1.92 billion. Zions has about 8,000 employees. Shares of the company closed Tuesday at $73.36 on the Nasdaq Stock Market.
Amegy, which has about 2,100 workers, reported 2004 net income of $68.5 million on sales of $379.7 million. Shares of the company closed Tuesday at $22.98 on the Nasdaq.