March 31, 2021: As publicly announced today, Heritage Southeast Bancorporation, Inc. (“HSBI”) and Heritage Southeast Bank have signed a definitive purchase and assumption agreement whereby VyStar Credit Union (“VyStar”) will acquire the assets and assume the liabilities of Heritage Southeast Bank in an all-cash transaction. Following the completion of this transaction, HSBI and Heritage Southeast Bank will wind down their operations and their remaining assets, after all obligations are settled, will be distributed to HSBI stockholders.
The terms of the purchase and assumption agreement, the purchase price ultimately paid by VyStar to HSBI is structured to provide for HSBI to have $27.00 per share in cash available for distribution to its shareholders after satisfaction of all of HSBI’s unconsolidated debt and any other obligations. In the event the transaction is consummated, the ultimate amount distributed to shareholders, as well as the timing of such distribution, will be determined by the final satisfaction of HSBI’s retained liabilities as well as the process by which HSBI liquidates.
The summary of the purchase and assumption agreement contained herein is qualified in its entirety by the terms of the purchase and assumption agreement which will be provided in connection with shareholder approval of the transaction.
A proxy statement containing important information about the proposed transaction will be mailed to the shareholders of HSBI. The shareholders of HSBI are urged to read this proxy statement, which will include the agreement, and other related documents (including any amendments or supplements), carefully when they become available.
In accordance with the terms of the purchase and assumption agreement, the purchase price paid by VyStar to HSBI is based on a formula to be calculated in connection with the Closing. To assist in interpreting the formula, we have summarized the current estimates of these calculations, however the estimates remain subject to change over time. VyStar’s overall purchase price will be an amount equal to $27.00 times the number of HSBI shares outstanding at closing (expected to be approximately 7 million shares) plus the amount needed to satisfy HSBI’s unconsolidated debt, including anticipated interest payments (approximately $50 million), plus HSBI’s expected tax liability associated with 2021 net income and the gain on sale associated with the transaction (approximately $19 million), plus the expected cost to liquidate and wind down Heritage Southeast Bank and HSBI following completion of the transaction (expected to be less than $1 million), less any remaining HSBI cash at the time of closing (also expected to be a de minimis amount). In connection with the liquidation of Heritage Southeast Bank (and included in the purchase price adjustments), Heritage Southeast Bank will make distributions to certain long-standing depositors who hold an interest in Heritage Southeast Bank’s liquidation account formed in connection with its conversion from stock to mutual form in 1995.
In addition, HSBI is expected, prior to closing (and without affecting the distribution available to shareholders) to settle for cash all then remaining in-the-money stock options, unvested restricted shares of stock, and any stock-based SERP agreements (representing an aggregate value of approximately $7 million).
In the event the transaction is not consummated prior to November 1, 2021, the purchase and assumption agreement provides that the aggregate purchase price paid by VyStar to HSBI will increase by an amount equal to HSBI’s consolidated net earnings from October 1 through the Closing Date. Any such increase would be anticipated to increase the amount of cash available for distribution to shareholders of HSBI.
As set forth in the purchase and assumption agreement, the calculation of these amounts are subject to a series of procedures for resolving any disagreement, including a post-closing true-up 90-days post-closing.
In connection with the transaction, HSBI is also expected, again, prior to closing (and without affecting the distribution available to shareholders) to satisfy for cash certain transaction expenses associated with the contemplated transaction, including the payment of professional fees, termination of employment contracts, and the settlement of certain cash-based SERPs (estimated to be an aggregate cost of approximately $15 million).
[HSBI currently estimates that VyStar’s purchase price and cost to satisfy the equity compensation and transaction expenses will be approximately [$279] million, inclusive of approximately [$21] million in transaction expenses. HSBI makes no assurances that it will update these estimates should they change.] In the event VyStar’s calculated purchase price and cost to satisfy the equity compensation and transaction expenses exceeds $284.5 million, VyStar will have the right to not consummate the transaction under the purchase and assumption agreement. In addition, HSBI will have the right to not consummate the transaction in the event that the expected per share amount available for distribution to shareholders is less than $27.00.
The transaction is expected to close late in 2021, subject to customary closing conditions, including the approval of HSBI stockholders and receipt of necessary regulatory approvals.
In connection with seeking shareholder approval of the contemplated transaction, the Board of Directors of HSBI anticipates seeking, at the same time, shareholder approval for the liquidation of HSBI. Management and the board of directors are continuing to consider the best means for facilitating an orderly liquidation of HSBI following consummation of the transaction and efficiently settling any remaining liabilities, including HSBI’s tax liabilities, and distributing the cash to stockholders.
Forward Looking Statements:
This summary contains forward-looking statements. These forward-looking statements include, but are not limited to, statements about the benefits of the proposed acquisition of HSBI by VyStar, statements related to the expected timing of the completion of the acquisition, the combined company's plans, objectives, expectations and intentions, and other statements that are not historical facts. Forward-looking statements may be identified by terminology such as "may," "will," "should," "scheduled," "plans," "intends," "anticipates," "expects," "believes," estimates," "potential," or "continue" or negatives of such terms or other comparable terminology. All forward-looking statements in this press release, or in any other written or oral communication that relates to the proposed acquisition or to matters that may affect such proposed acquisition are subject to risks, uncertainties and other factors that may cause the actual results, performance or achievements of HSBI or VyStar to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, among others, (1) disruption from the proposed acquisition with customers, suppliers, employees or other business partners, (2) the occurrence of any event, change or other circumstances that could give rise to the termination of the agreement, (3) the failure to obtain the necessary approvals by the shareholders of HSBI, (4) the ability by the parties to obtain required governmental approvals of the acquisition (5) the failure of the closing conditions in the agreement to be satisfied, or any unexpected delay in closing the acquisition, and (6) general competitive, economic, political and market conditions.
HSBI disclaims any obligation to update or revise any forward-looking statements contained in this communication (which statements speak only as of the date hereof), or in any other written or oral communication that relates to the proposed combination or to matters that may affect such proposed combination, whether as a result of new information, future events or otherwise.
Media Contacts:
Kevin McAuliffe
971-244-2555
kevinm@theIRgroup.com
and
Pat Check
770-789-6051
pat@latitude34pr.com