ALTAVISTA, Va. and DANVILLE, Va., GLOBE NEWSWIRE) -- Pinnacle Bankshares Corporation (OTCQX: PPBN) and Virginia Bank Bankshares, Inc. (OTC Pink: VABB) today jointly announced that they will be moving forward with their planned merger and have entered into an amendment to the initial Agreement and Plan of Reorganization, dated January 21, 2020, between Pinnacle and Virginia Bank.
The effects of the COVID-19 pandemic on the companies’ local economies, financial markets and other conditions prompted both companies to modify their respective financial projections and reevaluate the terms of the merger. The amendment to the Agreement was unanimously approved by the boards of directors of both companies today.
Under the terms of the amended Agreement, Virginia Bank shareholders will have the opportunity to elect to receive either $16.00 in cash (the “Cash Consideration”), or 0.5400 shares per share of Pinnacle common stock (the “Stock Consideration”) for each share of Virginia Bank common stock held, subject to allocation and proration such that 60% of the Virginia Bank common shares will be exchanged for the Stock Consideration and 40% of the shares will be exchanged for the Cash Consideration.
Relative to the initial Agreement, the amended Agreement includes the same Cash Consideration ($16.00 per share), an adjusted exchange ratio (0.5400 compared to 0.5000 shares offered in the initial Agreement), and a higher percentage of shares of Virginia Bank common stock that will receive the Cash Consideration (40% compared to 30% under the initial Agreement). All other terms of the transaction will remain substantially the same. In addition, Pinnacle intends to issue $7.0 million of subordinated debt in connection with the merger and plans to maintain a dividend payout policy that appropriately balances providing returns in the form of a cash dividend with retaining earnings to mitigate economic uncertainties and capitalize growth.
Based upon Pinnacle’s 10-trading day average stock price of $19.73 as of June 8, 2020, the implied aggregate deal value was $23.5 million. This represents an 11% market premium per share to Virginia Bank’s closing price as of June 8, 2020 and approximately 96% of Virginia Bank’s tangible book value as of the most recent quarter. With the amended transaction terms and updated financial projections, the transaction is now expected to be 37.7% accretive to Pinnacle’s updated 2021 financial projections. Pinnacle expects to issue to Virginia Bank shareholders approximately 594,692 shares of Pinnacle common stock in the merger.
Aubrey H. “Todd” Hall, III, Pinnacle’s President and Chief Executive Officer, stated, "Although the economic environment is much different due to the impact of the COVID-19 pandemic, the strategic merits of this transaction have not changed. In fact, we believe there is a stronger case than ever for a combined company that will be better equipped to weather the current headwinds and be positioned to take advantage of the eventual recovery. With some enhancements to deal terms resulting from adjustments to our respective financial projections, I believe we have developed a solid plan that will allow our two institutions to move the merger process and our partnership forward.”
Donald W. Merricks, President and Chief Executive Officer of Virginia Bank, said, “During the recent economic downturn we have worked together as partners to address the impact on our banks and to focus on our shared vision for the future of our combined institution. These unprecedented times have not changed our belief that the combination of our neighboring community banks will allow us to better serve our local communities and increase shareholder value. Further, with the revised, higher exchange ratio, Virginia Bank shareholders that receive the Stock Consideration should benefit from any future increases in Pinnacle’s stock price at a faster rate than they would under the original exchange ratio.”
The transaction is now expected to be completed at the end of the third quarter or early in the fourth quarter of 2020, subject to the approval of both companies’ shareholders, regulatory approvals and other customary closing conditions.
About Pinnacle
Pinnacle Bankshares Corporation is a locally managed community banking organization based in Central Virginia. The one-bank holding company of First National Bank serves an area consisting primarily of all or portions of the Counties of Campbell, Pittsylvania, Bedford, Amherst and the City of Lynchburg. The Company has a total of 10 branches with two located in the Town of Altavista, where the Bank was founded. Other branch locations include Village Highway in Rustburg, Wards Road near the Lynchburg Regional Airport, Timberlake Road in Campbell County, South Main Street in the Town of Amherst, Old Forest Road, Odd Fellows Road and Main Street in the City of Lynchburg and Forest Road in Bedford County. The Company also recently opened a loan production office in Charlottesville, Virginia. First National Bank is in its 112th year of operation.
About Virginia Bank
Virginia Bank Bankshares, Inc. is the bank holding company for Virginia Bank and Trust Company. Founded in 1945, Virginia Bank and Trust Company is a state-chartered commercial bank headquartered in Danville, Virginia, with seven banking offices located in Danville and Chatham, Virginia. The bank serves businesses, professionals and consumers with a wide variety of financial services, including retail and commercial banking.
