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Cadence cites pressures in failed merger

Sept. 20 deadline apparently was dealbreaker

As September moved past its mid-point, Cadence Bank executives saw their choices narrowed to this: Get a buyer deal done right away or feel the heat of federal sanctions for failing to meet a Sept. 19 deadline to significantly raise capital reserves.

Cadence faced a two-minute drill with no timeouts left, according to a proxy statement the bank filed with the U.S Securities & Commission.

Executives of the Starkville-based bank say a take-it-or-leave-it deadline of Sept. 20 set by Trustmark National Bank on an acquisition offer led it and its board to prematurely accept the offer and reject a tentative — but more attractive — one from rival suitor Community Bancorp Corp., a $900-million banking investment group.

Though it had accepted Trustmark’s offer and met the deadline for the deal, Cadence’s fidelity to the $9.8-billion Trustmark began to fade within days of the highly publicized signing of a “definitive” agreement for the Jackson bank to acquire Cadence, a regional bank with 38 locations in four states.

Movement toward a reversal grew as Community Bancorp came closer to making a full merger commitment — something the Houston investment group had balked at earlier, saying it needed to do more due diligence on the troubled bank. In the proxy filing, Cadence officials indicated they were leaning strongly toward Community Bancorp’s offer all along but Trustmark’s insistence on the Sept. 20 deadline prevented the granting of more time for Community Bancorp’s due diligence.

Then came the Community Bancorp offer, minus the condition for additional time to assess the bank’s viability. The new deal offered an appealing stock buyout price, upwards of $200 million in new capital and a pledge to keep Cadence’s workforce intact. And it included covering a $2-million penalty fee to Trustmark.

Cadence’s late switch led one analyst to predict a “tarnished” brand for the bank and for outside observers to raise the prospect of a diminished image for the bank.

“That’s not the way business is done in Mississippi,” state Banking Commissioner John Allison said.

“I can guarantee you they have hurt their reputation,” said Ken Cyree, dean of the University of Mississippi School of Business and head of the state Banking Association’s School of Banking.

Cadence is satisfied it made the right call, however.

“They bring some additional advantages to the table that Trustmark did not,” said Lewis Mallory Jr., Cadence chairman and CEO, at a press conference announcing the merger with Community Bancorp.

Now it is up to Cadence’s shareholders to decide if Mallory is correct. With the proxy in hand, they can vote on the proposed takeover in the next 25 days.


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