Pinnacle Financial Partners has completed the previously announced purchase of an additional 19 per cent interest in Bankers Healthcare Group (BHG) for USD114 million.
The transaction was funded with a combination of 860,470 shares of Pinnacle common stock and USD74.1 million of cash. As a result, Pinnacle now owns 49 per cent of BHG.
Consistent with previous expectations, Pinnacle funded substantially all of the cash portion of the incremental investment with short-term borrowings which it expects to repay with the proceeds of an offering of Pinnacle Bank-issued subordinated indebtedness. On 3 March, 2016, Pinnacle Bank agreed to issue an additional USD70 million of its 4.875 per cent subordinated notes due 2025 to certain institutional investors at a discounted price of 99.023 per cent of the principal, resulting in an effective interest rate to the purchasers of the notes of 5.125 per cent per annum through July 30, 2020, payable semi-annually. After July 20, 2020, the subordinated notes will bear a floating rate of interest at 90-Day LIBOR + 3.128 per cent until the notes mature on July 30, 2025. Pinnacle estimates that the net proceeds from the sale of the notes will be received on or about March 10, 2016 and will approximate USD69.3 million before underwriters’ fees and transaction expenses. The notes are expected to qualify as Tier 2 capital for regulatory purposes.
Pinnacle continues to anticipate that the incremental BHG investment will be approximately 2 per cent accretive to the firm’s estimated fully diluted earnings per share in 2016 and 4 per cent accretive to the estimated fully diluted earnings per share in 2017, inclusive of the aforementioned subordinated indebtedness issuance.
