Cathay General Bancorp (CATY), the holding company for Cathay Bank, and Asia Bancshares, Inc. , the holding company for Asia Bank, N.A., announced that they have entered into a definitive agreement for the merger of Asia Bancshares into Cathay.
As per the terms of the agreement, Cathay will acquire Asia Bancshares for an aggregate purchase price of approximately $126 million, subject to adjustment, including for an increase of net book value above a specified target amount. The aggregate consideration mix paid to shareholders of Asia Bancshares will be between 45% to 55% Cathay common stock and the remainder in cash, subject to adjustment if the average closing price of Cathay common stock is lower than $20.
Shareholders of Asia Bancshares will be entitled to elect to receive, subject to proration, the merger consideration in cash, shares of Cathay common stock or a combination of cash and shares of Cathay common stock.
The exchange ratio for determining the number of shares of Cathay common stock deliverable to shareholders of Asia Bancshares will float based on the weighted average closing price of Cathay's common stock for the consecutive period of ten trading days beginning on the fifteenth trading day immediately preceding the closing date and concluding at the close of trading on the fifth trading day immediately preceding the closing date but will be fixed if the average closing price of Cathay's common stock is lower than $20.00 or higher than $27.00 per share.
Asia Bancshares operates, through its subsidiary Asia Bank, three branches located in New York and one branch located in Maryland. As of September 30, 2014, Asia Bancshares reported, on a consolidated basis, total assets of $497 million, total loans of $419 million, and total deposits of $418 million.
The transaction, which has been unanimously approved by the Boards of Directors of both Cathay and Asia Bancshares, is expected to be completed during the second quarter of 2015.
The transaction is subject to approval by Asia Bancshares shareholders, regulatory approvals and other customary closing conditions. Certain shareholders of Asia Bancshares have entered into voting agreements in support of the merger.
The transaction is expected to be between 2% to 3% accretive to Cathay's annual earnings, excluding any one-time merger and restructuring charges.
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