Activist community

Middlefield Banc to Acquire Community Bank Liberty Bancshares in $64.4M Deal

Middlefield Banc Corp. (NASDAQ: MBCN) announced that it has reached an agreement to acquire Liberty Bancshares Inc. (OTC Markets: LBSI), a community bank headquartered in Ada, Ohio.

Middlefield is the holding company of The Middlefield Banking Co., while Liberty operates National Liberty Bank. The combination builds on Middlefield’s presence in the Columbus market while adding new business to it in the northwest region of the state.

One of Middlefield’s biggest shareholders, who has pressured the company to sell itself, finds the acquisition a step in the right direction for the company, although ultimately somewhat “disappointing”.

Under the terms of the agreement, Liberty shareholders will receive 2,752 common shares of Middlefield. Based on Middlefield’s closing share price of $24.95 on May 25, the transaction is valued at approximately $64.4 million.

The deal is expected to close in the fourth quarter of 2022, when Liberty shareholders will own approximately 31% of the combined company.

“We are thrilled to announce our association with Liberty Bancshares, which complements our growth in the Central Ohio market and expands our presence in the fascinating Northwest Ohio market,” said President and CEO. Middlefield manager James Heslop II in a statement. “Once the transaction is complete, we expect to benefit as a large bank with total assets of approximately $1.8 billion, strong earnings growth and a strong footprint around two of the world’s largest and most important markets. fastest growing companies in Ohio. We believe this is a compelling transaction that generates a significant increase in earnings per share, has minimal dilution to tangible book value and a manageable payback period.”

Liberty is adding approximately $438 million in assets to Middlefield, which is expected to grow to approximately $1.8 billion in total assets, $1.3 billion in total loans and $1.5 billion in total deposits with the OK.

Liberty is also adding six offices to Middlefield’s footprint, growing it to 22 locations in Ohio. Liberty offices are located in Franklin, Union, Logan and Hardin counties.

“We are delighted to join The Middlefield Banking Co., an organization that shares a common philosophy of supporting customers, employees and communities,” Liberty Chairman and CEO Ronald Zimmerly said in a statement. communicated. “I am excited about the future we are creating together.”

Once the deal closes, Zimmerly will join Middlefield as the bank’s chairman. He will also become chairman of Middlefield’s holding company, provided shareholders agree to separate the roles of chairman and chief executive.

Additionally, Middlefield said he would add three new Liberty board members: Zimmerly, Liberty Chairman Mark Watkins and Spencer Cohn, a director of Castle Creek Capital, a San Diego-focused private equity firm. on community banks which is also Liberty’s largest shareholder. Castle Creek is expected to own 7% of the combined company.

“Castle Creek believes the combined company represents a solid long-term investment, and the transaction will benefit shareholders of Middlefield and Liberty,” Cohn said in a statement. “We look forward to having a voice on the board and representing the best interests of all shareholders.”

Ancora Holdings, a well-known activist investor that owns about 7.8% of Middlefield and is the company’s largest shareholder, has pressured Middlefield to consider a sale that would benefit shareholders.

Middlefield executives say the company’s board generally prefers to see the bank remain independent. Heslop noted in April that Middlefield would continue to stay in the acquisition market — its latest deal involved the $40.8 million acquisition of Liberty Bank NA from Beachwood — while also working to promote its stock, which he deems it undervalued, as a good investment.

Ancora publicly called on Middlefield to improve or pursue a sale in the summer of 2019 and repeated that message this spring.

“We don’t understand the geography of the deal. It’s across the state,” Ancora CEO Frederick DiSanto said. “So we don’t know how many synergies there will be.”

He added, however, that he liked Castle Creek’s involvement.

“It’s a little disappointing, to be quite frank,” DiSanto said. “But Castle Creek – which is a very good investor – getting a seat on the board and rolling in its stock, we think that’s very positive.”