Bank Mutual approached 11 banks about merger

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Brown Deer-based Bank Mutual Corp. approached 10 other financial institutions about a potential merger before it settled on Associated Banc-Corp, according to a proxy statement filed with the SEC Monday.

The Milwaukee Associated Banc-Corp offices.

While the financial institutions are not named, Bank Mutual’s board did authorize its management to move forward with a potential merger with a “similarly sized Midwest institution,” referred to as Party 1, at which time its financial advisor, RBC Capital Markets LLC, contacted 10 other parties that may be interested in acquiring Bank Mutual. The banks all operated in Bank Mutual’s geographical market or an adjacent market. Three of those 11 showed interest, including Associated.

Bank Mutual conducted due diligence on Party 1 and was in discussions with the bank, but the two companies were not able to come to an agreement on price and that deal fell through in March.

In May, Bank Mutual’s board and RBC discussed the company’s strategic alternatives, and ultimately decided to conduct a formal bidding process among the three parties that showed interest in an acquisition. One of the parties did not move forward, and Associated then bid against one other bank to secure the acquisition.

In the end, the unnamed bank bidding with Associated offered a 90 percent stock transaction which would have garnered $10.39 per common share, while Associated offered an all-stock transaction which would pay $10.63 per common share. On July 5, Bank Mutual’s board decided to move forward with the Associated transaction. Finally, the banks announced the merger on July 20, which was ultimately priced at $10.38 per share, for a total price of $482 million.

The transaction is expected to close in the third quarter, subject to regulatory and shareholder approvals and other conditions, after which branch consolidations are expected to result in cost savings. Bank Mutual would have to pay $17 million to terminate the merger at this point.

Bank Mutual also used the proxy statement to lay out 25 reasons it chose to be acquired by Associated, including: “the board’s understanding of the economic, interest rate, competitive and regulatory environment in which financial institutions operate and would be expected in the future, and the likely effect of these factors on Bank Mutual both with and without the merger,” and “the cost savings expected to be realized by the combined entities, as well as the likely effects, including adverse effects, of those cost savings on Bank Mutual’s employees, and related protections and benefits expected to be provided by Associated to affected Bank Mutual employees.”

And Bank Mutual confirmed it has been evaluating potential mergers for some time.

“From time to time, Bank Mutual has had general discussions with other financial institutions regarding the possibility of a potential future strategic transaction,” the company said in the filing. “These general discussions have included potential ‘merger of equals’ transactions with similarly sized institutions and potential acquisitions of smaller institutions to enter new markets or increase penetration in current markets. Bank Mutual has not effected any acquisition transactions in recent years because it did not believe that any such transactions could be made on terms that it considered attractive. Bank Mutual has also considered other actions such as branch closures or consolidations.”

Also included in the filing was more detail about the leadership transition. Bank Mutual president and chief executive officer David Baumgarten will immediately leave the company, but serve as a part-time consultant through December 31, 2018.  His services will be limited to 20 percent or less of the level of services he provided as a Bank Mutual employee, and he will receive $350,000 for his consultant stint. Baumgarten is also set to receive about $2.6 million in compensation related to the acquisition.

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Brown Deer-based Bank Mutual Corp. approached 10 other financial institutions about a potential merger before it settled on Associated Banc-Corp, according to a proxy statement filed with the SEC Monday.

The Milwaukee Associated Banc-Corp offices.

While the financial institutions are not named, Bank Mutual’s board did authorize its management to move forward with a potential merger with a “similarly sized Midwest institution,” referred to as Party 1, at which time its financial advisor, RBC Capital Markets LLC, contacted 10 other parties that may be interested in acquiring Bank Mutual. The banks all operated in Bank Mutual’s geographical market or an adjacent market. Three of those 11 showed interest, including Associated.

Bank Mutual conducted due diligence on Party 1 and was in discussions with the bank, but the two companies were not able to come to an agreement on price and that deal fell through in March.

In May, Bank Mutual’s board and RBC discussed the company’s strategic alternatives, and ultimately decided to conduct a formal bidding process among the three parties that showed interest in an acquisition. One of the parties did not move forward, and Associated then bid against one other bank to secure the acquisition.

In the end, the unnamed bank bidding with Associated offered a 90 percent stock transaction which would have garnered $10.39 per common share, while Associated offered an all-stock transaction which would pay $10.63 per common share. On July 5, Bank Mutual’s board decided to move forward with the Associated transaction. Finally, the banks announced the merger on July 20, which was ultimately priced at $10.38 per share, for a total price of $482 million.

The transaction is expected to close in the third quarter, subject to regulatory and shareholder approvals and other conditions, after which branch consolidations are expected to result in cost savings. Bank Mutual would have to pay $17 million to terminate the merger at this point.

Bank Mutual also used the proxy statement to lay out 25 reasons it chose to be acquired by Associated, including: “the board’s understanding of the economic, interest rate, competitive and regulatory environment in which financial institutions operate and would be expected in the future, and the likely effect of these factors on Bank Mutual both with and without the merger,” and “the cost savings expected to be realized by the combined entities, as well as the likely effects, including adverse effects, of those cost savings on Bank Mutual’s employees, and related protections and benefits expected to be provided by Associated to affected Bank Mutual employees.”

And Bank Mutual confirmed it has been evaluating potential mergers for some time.

“From time to time, Bank Mutual has had general discussions with other financial institutions regarding the possibility of a potential future strategic transaction,” the company said in the filing. “These general discussions have included potential ‘merger of equals’ transactions with similarly sized institutions and potential acquisitions of smaller institutions to enter new markets or increase penetration in current markets. Bank Mutual has not effected any acquisition transactions in recent years because it did not believe that any such transactions could be made on terms that it considered attractive. Bank Mutual has also considered other actions such as branch closures or consolidations.”

Also included in the filing was more detail about the leadership transition. Bank Mutual president and chief executive officer David Baumgarten will immediately leave the company, but serve as a part-time consultant through December 31, 2018.  His services will be limited to 20 percent or less of the level of services he provided as a Bank Mutual employee, and he will receive $350,000 for his consultant stint. Baumgarten is also set to receive about $2.6 million in compensation related to the acquisition.

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