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Denver-based FirstSun Capital Bancorp and Seattle-based HomeStreet have agreed to terminate their proposed merger after determining “it is in the best interests of their respective companies,” both firms said in filings Tuesday.
The termination comes roughly three weeks after the banks disclosed they were “discussing the pursuit of an alternative regulatory structure” for the deal after allegedly failing to receive regulatory approval from the Federal Reserve and Texas Department of Banking. The Texas regulator would have been necessary because, under the deal, HomeStreet would have merged into a Dallas-based FirstSun subsidiary, Sunflower Bank.
FirstSun is “disappointed with the outcome” but is focused on growing in its local markets, CEO Neal Arnold told American Banker in a statement Tuesday.
“We are proud of our strong history of earnings performance and we remain as healthy and strong as ever,” Arnold said. “Further, we remain well-positioned to continue our strong performance and take advantage of the growth opportunities across all the attractive markets in our footprint.”
HomeStreet declined to comment to the publication. But during a Nov. 1 conference call, the bank’s CEO, Mark Mason, said, “if you assume a termination of the merger agreement, we will be free to consider all strategic options.
The Seattle-based bank warned shareholders in a Nov. 8 filing with the Securities and Exchange Commission that it may “need to initiate litigation against FirstSun to seek judicial relief from the Merger Agreement if the parties are unable to reach agreement on an alternative regulatory structure … or a mutual termination.”
The FirstSun merger proposal, as written, limited HomeStreet’s ability to pursue alternatives because it contained “no shop” restrictions that kept the bank from initiating, soliciting or knowingly encouraging or facilitating other acquisition proposals, HomeStreet said. HomeStreet would also have had to pay a $10 million termination fee, it said.
HomeStreet had received two competing bids before agreeing to align with FirstSun in January, according to an earlier SEC filing.
The bank’s board chose FirstSun because it offered Mason a full-time position for two years after the deal's closing, whereas the other two transactions would have put him in advisory or consulting roles, Chuck Griege, chief investment officer at Blue Lion Capital, told S&P Global.