First Interstate BancSystem, Great Western Bancorp to combine in $2B deal

Billings, Mont.-based First Interstate BancSystem Inc., the parent company of First Interstate Bank, will combine with Sioux Falls, S.D.-based Great Western Bancorp Inc., the parent company of Great Western Bank, in an all‐stock transaction.

Under the terms of the deal, Great Western Bancorp shareholders will receive 0.8425 shares of First Interstate class A common stock for each Great Western Bancorp share they own. The implied total transaction value based on closing prices on Sept. 15 is approximately $2.0 billion, according to a news release.

Following completion of the transaction, Great Western Bancorp shareholders will collectively own 43% of the combined company.

At announcement, S&P Global Market Intelligence calculates the deal value to be 169.25% of common equity, 170.04% of tangible common equity, 15.04% of assets, 17.03% of deposits and 12.13x earnings. The tangible book premium to deposits ratio is 7.02%.

S&P Global Market Intelligence valuations for bank and thrift targets in the Midwest region between Sept. 15, 2020, and Sept. 15, 2021, averaged 132.04% of book and 147.94% of tangible book and had a median of 15.96x last-12-months earnings on a per-share basis.

Under a conservative set of assumptions, First Interstate expects the transaction to be 20% accretive to EPS in 2023, assuming the fully phased-in cost synergies. The transaction is expected to be accretive to First Interstate's tangible book value per share and to its tangible common equity to tangible assets ratio.

The deal, which was approved by the boards of both companies, is expected to close during the first calendar quarter of 2022. The conversion of Great Western Bancorp branches to First Interstate branches is expected to take place during the second quarter of 2022.

Under the agreement, Great Western Bancorp will merge into First Interstate, and the combined holding company and bank will operate under the First Interstate name and brand. The combined company's headquarters will remain in Billings, Mont.

Based on S&P Global Market Intelligence data, with the completion of the deal, First Interstate will enter Nebraska with 51 branches to be ranked sixth with a 3.50% share of approximately $79.86 billion in total market deposits, will enter Iowa with 48 branches to be ranked sixth with a 2.95% share of about $113.17 billion in total market deposits and will expand in South Dakota by 37 branches to be ranked fourth with a 0.63% share of roughly $673.4 billion in total market deposits. In addition, the company will enter Colorado with 20 branches to be ranked No. 23 with a 0.70% share of approximately $197.15 billion in total market deposits, will enter Arizona with nine branches to be ranked No. 22 with a 0.33% share of about $199.37 billion in total market deposits and will enter Missouri with six branches to be ranked No. 143 with a 0.08% share of roughly $230.33 billion in total market deposits. It will also enter Kansas with two branches to be ranked No. 110 with a 0.15% share of approximately $97.06 billion in total market deposits, will enter North Dakota with one branch to be ranked No. 72 with a 0.02% share of about $38.42 billion in total market deposits and will enter Minnesota with one branch to be ranked No. 292 with a 0.01% share of roughly $245.15 billion in total market deposits.

Five directors from Great Western Bancorp will join First Interstate's board upon completion of the deal. First Interstate's existing dual-class stock structure will sunset at the record date of its next annual shareholder meeting. At that time, existing First Interstate class B common stock will be converted 1:1 into class A common stock, and First Interstate will no longer be a controlled company, according to the news release.

The family of Homer Scott Sr. and Mildred Scott, who founded First Interstate, will remain significant shareholders in First Interstate, and family members will continue to serve in board positions.

Great Western Bancorp's president and CEO, Mark Borrecco, will join the combined company as chief banking officer and will work closely with First Interstate's chief banking officer, Russ Lee, for the transition process.

As part of the deal, First Interstate has agreed to gift over $20 million to the First Interstate BancSystem Foundation.

Keefe Bruyette & Woods was the lead financial adviser to First Interstate. Barclays also served as a financial adviser to First Interstate, and Davis Polk & Wardwell LLP acted as First Interstate's legal adviser.

Piper Sandler & Co. served as exclusive financial adviser and Wachtell Lipton Rosen & Katz acted as legal adviser to Great Western Bancorp.

Goldman Sachs & Co. LLC acted as financial adviser and Latham & Watkins LLP served as legal adviser to the Scott family First Interstate shareholder group in connection with the transaction.

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