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Stockholder vote on Cadence buyout set today

December 9, 2010


Cadence Bank shareholders will vote today whether to back a Texas investment firm’s offer to buy up common and federally-owned preferred stock and take the institution to private control.
The shareholders will cast votes at 10 a.m. at the bank’s headquarters in downtown Starkville.
Those with stock in Cadence will be asked to make two decisions, the primary one being whether to accept the the Oct. 6 deal to allow Maroon Acquisition Corp. and Cadence to merge. MAC is a wholly-owned subsidiary of Community Bancorp (CBC). Cadence would continue as a fully-owned subsidiary of CBC.
The second issue will be whether to adjourn the meeting to a later time to allow further proxy solicitation of proxies in case there are not sufficient votes at meeting time to approve the items set for consideration.
The Cadence board recommends approval of both items, the proxy filing shows.
In addition to paying $2.50 per share in cash to those who hold common stock in the bank, the deal calls for CBC to purchase the $44 million in preferred stock shares from the U.S. Treasury for a price of approximately $38 million.
If the merger does not take place for any reason, shareholders will not receive the merger consideration, the current management will continue to guide the company as a stand-alone, independent institution and common stock values will remain subject to risks and uncertainties spelled out in the company’s annual report, Cadence officials have said in a proxy filing.
The deal is also subject to regulatory approval.
In October, Cadence chose to halt a planned merger with Jackson-based Trustmark in favor of the proposed deal with CBC, founded in 2009 to invest in community banks. In November, CBC officials announced they raised $1 billion in capital to make their investments.
Under the Trustmark deal, Cadence shareholders were to receive 0.096993 shares of Trustmark stock in a tax-free exchange. Trustmark was to issue about 1,155,104 shares of common stock for all oustanding Cadence common shares.
The transaction is valued at $23.8 million – or $2 per common Cadence share – working from a price of $20.62 for Trustmark shares.
Trustmark offered to buy the Treasury’s stock in the bank at a price of $30.05 million cash.
Cadence paid $2 million to Trustmark to exit the deal.
Paul B. Murphy Jr., CBC’s CEO and president, is a Mississippi State University alumnus.
Murphy served as CEO and director of Amegy Bank, a Texas-based operation he co-founded in 1990 and helped grow from less than $100 million to more than $11 billion in assets.
Amegy – which operates 85 banking centers in Houston, Dallas and San Antonio – was sold to Zions Bancorporation in 2005.
CBC officials describe the firm as being set up to “acquire, stabilize and operate failed or distressed U.S. banks” and say most of CBC’s investors are private and public pension funds, endowments and foundations.
There were three fundamental reasons for the decision to make the move to the CBC deal, Cadence Cadence CEO Lewis F. Mallory Jr. said in early October: Price, jobs and name.
First, the price CBC offered was a premium to the previous price and would not be tied to market fluctuations. Next, the transaction would preserve jobs and the “Prospects are quite high ... that those jobs would multiply, not be diminished,” Mallory said at the time.
Finally, Cadence would keep its name and benefit from a “huge capital injection ... It will come in significant supply with this transaction,” Mallory said.
Back in October, Murphy estimated Cadence would have $150 million to $200 million in new capital available,
If the deal takes place, this will be CBC’s first acquisition and Cadence – which operates in five states – would remain headquartered in Starkville.
On Dec. 1, Cadence officials entered into a memorandum of understanding with RSD Capital, the lead plaintiff in a class-action suit filed in New York in October, regarding a settlement of RSD’s action.
The suit alleges certain Cadence officials entered into the agreement to sell the bank to CBC for personal gain. Bank officials have said the lawsuit lacks merit.
The suit was filed on behalf of RSD Capital and all other Cadence shareholders except for those named as defendants in the suit, including Cadence’s Board of Directors and others affiliated with them.
RSD Capital – a New York resident – has owned Cadence common stock on a continuing basis since on or around Oct. 15, 2007.
“The MOU contemplates that the parties will enter into a stipulation of settlement,” which will be “subject to customary conditions, including Court approval following notice to Cadence’s shareholders,” officials said in a Dec. 2 filing with the Securities and Exchange Commission.
The deal between Cadence and CBC remains subject to regulatory approval.
Cadence stock closed at $2.45 Wednesday, unchanged from the previous day.

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