Marietta, Ohio-based Peoples Bancorp Inc., the parent company of Peoples Bank, agreed to acquire Louisville, Ky.-based Limestone Bancorp Inc., the parent company of Limestone Bank Inc., in an all-stock transaction valued at approximately $208.2 million.

Under the terms of the agreement, Limestone will merge with and into Peoples, and Limestone Bank will merge with and into Peoples Bank.

At announcement, S&P Global Market Intelligence calculates the deal value to be 165.01% of common equity, 176.05% of tangible common equity, 17.69% of deposits, 14.43% of assets and 12.55x earnings. The tangible book premium-to-core deposits ratio is 7.82%.

Market Intelligence valuations for bank and thrift targets in the Midwest region between Oct. 24, 2021, and Oct. 24, 2022, averaged 150.06% of book and 154.13% of tangible book and had a median of 18.44x last-12-months earnings, on an aggregate basis, and averaged 144.31% of book and 155.36% of tangible book and had a median of 16.28x LTM earnings, on a per-share basis.

As of Sept. 30, Limestone had $1.5 billion in total assets, which included $1.1 billion in total net loans, and $1.2 billion in total deposits, on a consolidated basis.

Limestone Bancorp, through its subsidiary and 226 associates, operates 20 branches in 14 counties across Kentucky.

With the completion of the deal, Peoples Bancorp will expand in Kentucky by 21 branches to be ranked No. 11 with a 1.69% share of approximately $118.72 billion in total market deposits.

As of Sept. 30, Peoples had $7.0 billion in total assets, including 113 full-service bank branches in Ohio, West Virginia, Kentucky, Virginia, Washington, D.C., and Maryland.

Upon completion, the combined company will have about $8.5 billion in total assets, $5.7 billion in total loans and $7.1 billion in total deposits, with 150 locations in Ohio, West Virginia, Kentucky, Virginia, Washington, D.C., and Maryland, according to a news release.

The acquisition is expected to close during the second quarter of 2023, subject to satisfaction of customary closing conditions, regulatory approvals and shareholder approval of both companies. The merger agreement was unanimously approved by the board of directors of both companies.

According to the agreement terms, Limestone shareholders will receive 0.90 share of Peoples common stock for each share of Limestone common stock. The transaction is expected to qualify as a tax-free reorganization for shareholders of Limestone. The aggregate deal value stands at approximately $208.2 million, or $27.25 per share, based on Peoples' closing price of $30.28 per share as of Oct. 21.

The transaction is expected to be immediately accretive to Peoples' estimated earnings before one-time costs, with a tangible book value earn back of approximately 2.8 years, inclusive of interest rate marks, and an internal rate of return in excess of 20%.

Peoples was advised by Raymond James & Associates Inc. and law firm Dinsmore & Shohl LLP. Limestone was advised by Piper Sandler & Co. and law firm Wyatt Tarrant & Combs LLP.

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