SNBN - Sound Bank

[writser]

Another idea for the small fish. West Town Bancorp and Sound Bank announced a merger a few weeks ago. Deal presentation: link. Deal is expected to close in Q3. Merger of two microcap banks makes sense and is unlikely to attract regulators.

 

SNBN mcap: ~$21m, latest financials: link.

WTWB mcap: ~$73m pro forma after capital raise for deal, latest financials: link.

 

Both stocks are illiquid. Deal terms are 35% cash $12.75 and 65% 0.6x WTWB stock per SNBN share. If WTWB trades above $27.75 the exchange ratio will be capped. At last prices, the offer package is worth $14.25 vs. a $12.56 SNBN shareprice. Said differently, through SNBN you are buying WTWB at $20.76. Current WTWB bid is $23.50. Capital raise for the deal was at $23. Nothing spectacular but current prices imply a decent IRR for a low-risk deal that should be wrapped up in 4-6 months.