As filed with the Securities and Exchange Commission on January 25, 2019.
Registration No. 333-
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SIMMONS FIRST NATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
| Arkansas | 6022 | 71-0407808 | ||
| (State or other jurisdiction
of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
501
Main Street
Pine Bluff, Arkansas 71601
(870) 541-1000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
George
A. Makris, Jr.
Chairman and Chief Executive Officer
Simmons First National Corporation
501 Main Street
Pine Bluff, Arkansas 71601
(870) 541-1000
(Name, address, including zip code, and telephone number, including area code, of agent for service)
With copies to:
Patrick
A. Burrow, |
Frank
M. Conner III Michael P. Reed Covington & Burling LLP One CityCenter 850 Tenth Street N.W. Washington, D.C. 20001 (202) 662-6000 |
Thomas H. Brouster, Sr. Chairman 10401 Clayton Road Frontenac, Missouri 63131 (314) 569-7200 |
Thomas C. Erb Leonard J. Essig Lewis Rice LLC 600 Washington Avenue, Suite 2500 St. Louis, Missouri 63101 (314) 444-7600 |
Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and upon completion of the mergers described in the enclosed document.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer x | Accelerated filer o | |
| Non-accelerated filer o | Smaller accelerated filer o | |
| Emerging growth company o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. o
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) o
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) o
CALCULATION OF REGISTRATION FEE
| Title of Each Class of Securities to be Registered | Amount
to be Registered(1)(2) | Proposed
Maximum Offering Price per Share | Proposed
Maximum Aggregate Offering Price(3)(4) | Amount
of Registration Fee(5) | ||||||||||||
| Class A Common Stock, $0.01 par value per share | 4,000,000(1) | N/A | $113,913,058(3) | $13,806 | ||||||||||||
| 7% Perpetual Convertible
Preferred Stock, par value $0.01 per share, Series C | 140(2) | N/A | $140,000(4) | $17 | ||||||||||||
| (1) | Represents the maximum number of shares of Class A Common Stock, par value $0.01 per share, of Simmons First National Corporation, or Simmons, that may be issued as consideration in the merger described herein, or the merger, between Simmons and Reliance Bancshares, Inc., or Reliance. |
| (2) | Represents the maximum number of shares of 7% Perpetual Convertible Preferred Stock, par value $0.01 per share, Series C of Simmons, which we refer to as Simmons series C preferred stock, estimated to be issuable upon completion of the merger described herein. This number is based on the number of shares of 7% Perpetual Convertible Preferred Stock, no par value, Series C of Reliance, which we refer to as Reliance series C preferred stock, outstanding as of January 24, 2019, and the exchange of each such share of Reliance series C preferred stock for one share of Simmons series C preferred stock, pursuant to the terms of the merger agreement described herein. |
| (3) | Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities Act of 1933, as amended, or the Securities Act, and computed pursuant to Rules 457(c), 457(f)(1) and 457(f)(3) under the Securities Act. The proposed maximum aggregate offering price was calculated as the difference of (a) $176,613,058, the product of (i) $1.70, the average of the high and low sales prices of Class A Common Stock, par value $0.25 per share, of Reliance, or Reliance common stock, as reported on OTC Market Group Inc.’s OTC Pink Open Market on January 18, 2019, and (ii) 103,890,034, the estimated maximum number of shares of Reliance common stock that may be exchanged for shares of class A common stock, par value $0.01 per share, of Simmons, being registered and (b) $62,700,000, the cash to be paid by Simmons to Reliance shareholders and holders of Reliance options and warrants pursuant to the merger agreement described herein. |
| (4) | Pursuant to Rule 457(f)(2) under the Securities Act, and estimated solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price was calculated as the product of (i) $1,000, the book value per share of Reliance series C preferred stock, on an as converted basis, to be exchanged in the merger as of January 24, 2019, the latest practicable date prior to the date of filing of this registration statement, and (ii) 140, the estimated maximum number of shares of Reliance series C preferred stock that may be exchanged in the merger. |
| (5) | Determined in accordance with Section 6(b) of the Securities Act, at a rate equal to $121.20 per $1 million of the proposed maximum aggregate offering price, or 0.0001212 multiplied by the proposed maximum aggregate offering price. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This document shall not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
PRELIMINARY - SUBJECT TO COMPLETION - DATED January 25, 2019
PROXY STATEMENT/PROSPECTUS
PROPOSED MERGER — YOUR VOTE IS VERY IMPORTANT
Dear Common Shareholders of Reliance Bancshares, Inc.:
On November 13, 2018, Simmons First National Corporation, which we refer to as Simmons, an Arkansas corporation and the parent holding company of Simmons Bank, an Arkansas state-chartered bank and wholly owned subsidiary of Simmons, and Reliance Bancshares, Inc., which we refer to as Reliance, a Missouri corporation and the parent holding company of Reliance Bank, a Missouri state-chartered bank and wholly owned subsidiary of Reliance, entered into an Agreement and Plan of Merger, which we refer to as the merger agreement. Under the terms and subject to the conditions of the merger agreement, among other things, (i) Reliance will merge with and into Simmons, with Simmons continuing as the surviving corporation, which we refer to as the merger, and (ii) simultaneously with the merger, Reliance Bank will merge with and into Simmons Bank, with Simmons Bank continuing as the surviving bank, which we refer to as the bank merger and, together with the merger, as the mergers.
The completion of the mergers will add Reliance Bank’s 22 branches to the Simmons Bank footprint and enhance Simmons’ retail presence within the St. Louis market.
Based on the assumptions set forth below, under the terms of the merger agreement, at the time the merger is completed, which we refer to as the effective time, each share of Class A Common Stock, par value $0.25 per share, of Reliance, which we refer to as Reliance common stock, that is issued and outstanding immediately prior to the effective time, excluding certain specified shares, will be converted into the right to receive, subject to possible adjustment, (i) [ ] shares of Class A Common Stock, par value $0.01 per share, of Simmons, which we refer to as Simmons common stock, with cash paid in lieu of fractional shares, and (ii) $[ ] in cash, which we refer to as the per share cash consideration. We refer to the [ ] shares of Simmons common stock as the per share stock consideration, and together with the per share cash consideration, the per share merger consideration. The per share cash consideration and the per share stock consideration are based on the following assumptions: (i) [ ] shares of Reliance common stock are subject to outstanding stock options of Reliance with a weighted average exercise price of $[ ], (ii) [ ] shares of Reliance common stock are subject to outstanding warrants of Reliance with a weighted average exercise price of $[ ], (iii) all outstanding indebtedness of Reliance that is convertible into Reliance common stock, which we refer to as the Reliance convertible debt, is converted into [ ] shares of Reliance common stock immediately prior to the effective time, (iv) [ ] shares of Reliance’s Series C Preferred Stock are outstanding as of the effective time, (v) no shares of Reliance’s Series C Preferred Stock are converted as of the effective time, (vi) all shares of Reliance’s Series C Preferred Stock are converted to shares of Simmons’ Series C Preferred Stock in connection with the merger, and (vii) [ ] shares of Reliance common stock are issued and outstanding, which includes the shares of Reliance common stock to be issued upon conversion of the Reliance convertible debt. In addition, we have assumed that the average closing price of Simmons common stock prior to the effective time is equal to $[ ], which is the closing sales price on the last practicable trading day prior to printing this proxy statement/prospectus.
In addition, each share of Reliance’s Series A Preferred Stock and Series B Preferred Stock will be converted into the right to receive one share of Simmons’ comparable Series A Preferred Stock or Series B Preferred Stock, respectively, and each holder of shares of Reliance’s Series C Preferred Stock, which together with Reliance’s Series A Preferred Stock and Series B Preferred Stock we refer to collectively as the Reliance preferred stock, will receive for each such share of Reliance’s Series C Preferred Stock one share of Simmons’ comparable Series C Preferred Stock, which together with Simmons’ Series A Preferred Stock and Series B Preferred Stock we refer to collectively as the Simmons preferred stock, unless such holder of Reliance Series C Preferred Stock affirmatively elects five days prior to the closing date to receive either (i) $1,000 per share plus any accrued and unpaid dividends, or the series C liquidation preference, or (ii) the per share merger consideration that would be payable if such share had been converted to Reliance common stock prior to the effective time.
In the aggregate, Simmons will issue 4,000,000 shares of Simmons common stock and pay $62,700,000 (minus the cash payment for outstanding stock options of Reliance, the cash payment for outstanding warrants of Reliance, shares and cash reserved for the conversion or redemption of the Reliance Series C Preferred Stock and subject to certain other adjustments pursuant to the merger agreement) to holders of Reliance common stock, which we refer to as the Reliance shareholders, upon completion of the merger, in addition to the issuance of Simmons preferred stock with an aggregate liquidation value of approximately $42.1 million to holders of Reliance preferred stock.
The market value of the per share stock consideration will fluctuate with the price of Simmons common stock. At the time of the special meeting of Reliance shareholders, Reliance shareholders will not know or be able to calculate the value of the per share merger consideration to be received upon completion of the merger. Shares of Simmons common stock are listed on the Nasdaq Global Select Market under the symbol “SFNC” and shares of Reliance common stock are traded on OTC Market Group Inc.’s OTC Pink Open Market under the symbol “RLBS.” The following table sets forth the closing sale prices per share of Simmons common stock and Reliance common stock on November 12, 2018, the last trading day before the public announcement of the signing of the merger agreement, and on [ ], 2019, the last practicable trading day prior to printing this proxy statement/prospectus. The table also shows the implied value of the per share merger consideration payable for each share of Reliance common stock on November 12, 2018 and on [ ], 2019, the last practicable trading day prior to printing this proxy statement/prospectus, in each case using the same assumptions described above other than the average closing price of Simmons common stock, which is assumed to be the closing sales price of Simmons common stock set forth below as of such date. We urge you to obtain current market quotations for Simmons common stock and Reliance common stock.
| Simmons Common Stock | Reliance Common Stock | Implied Value of Per Share Merger Consideration | ||||||||||
| November 12, 2018 | $ | 27.22 | $ | 1.80 | $ | [ ] | ||||||
| [ ], 2019 | $ | [ ] | $ | [ ] | $ | [ ] | ||||||
Reliance will hold a special meeting of its shareholders in connection with the mergers. Simmons and Reliance cannot complete the mergers unless the Reliance shareholders vote to approve the merger agreement and the transactions contemplated thereby, including the merger. The Reliance board of directors is providing this document to solicit Reliance shareholders’ proxy to vote in connection with the merger agreement and related matters. Shares of Reliance common stock that are subject to an irrevocable proxy previously granted to Thomas H. Brouster, Sr. will be voted by Mr. Brouster, and the voting of those shares will not be directed by the holder of record of such shares. In addition, this document is also being delivered to Reliance shareholders and holders of Reliance Series C Preferred Stock as Simmons’ prospectus for its offering of Simmons common stock and Simmons’ Series C Preferred Stock in connection with the merger.
The Reliance special meeting will be held virtually via live webcast at [ ], on [ ], 2019, at [ ] Central Time.
Your vote is very important. To ensure your representation at the Reliance special meeting, please complete, sign, date and return the enclosed proxy card or submit your proxy by telephone or the internet. Because the Reliance special meeting is virtual and is being conducted electronically, shareholders will not be able to attend the special meeting in person. During the virtual meeting, you may ask questions and will be able to vote your shares electronically. To participate, you will need the 16-digit control number provided on the proxy card. Additional directions for participating in the special meeting are available at [ ]. We encourage you to allow ample time for online check-in, which will begin at [ ] Central Time on [ ], 2019.
The Reliance board of directors unanimously approved the merger agreement and the transactions contemplated thereby and recommends that Reliance shareholders vote “FOR” approval of the merger agreement, and, if necessary or appropriate, “FOR” the proposal to adjourn the Reliance special meeting for the purpose of soliciting additional proxies in favor of approval of the merger agreement.
The enclosed proxy statement/prospectus provides a detailed description of the special meeting of Reliance shareholders, the mergers, the merger agreement, the documents related to the mergers, and other related matters. We urge you to read the proxy statement/prospectus, including any documents incorporated in the proxy statement/prospectus by reference, and its annexes, carefully and in their entirety, including “Risk Factors,” beginning on page 28, for a discussion of the risks relating to the mergers. You also can obtain information about Simmons from documents that it has filed with the Securities and Exchange Commission.
Sincerely,
 |
 |
|
George A. Makris, Jr. |
Thomas H. Brouster, Sr. Chairman Reliance Bancshares, Inc. |
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the merger, the issuance of the Simmons common stock to be issued in the merger, or the other transactions described in this document or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.
The securities to be issued in the merger are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either Simmons or Reliance, and they are not insured by the Federal Deposit Insurance Corporation, the Deposit Insurance Fund, or any other governmental agency.
The date of this proxy statement/prospectus is [ ], and it is first being mailed or otherwise delivered to Reliance shareholders on or about [ ].
Reliance
Bancshares, Inc.
10401 Clayton Road
Frontenac, Missouri 63131
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON [ ], 2019
To the Common Shareholders of Reliance Bancshares, Inc.:
Notice is hereby given that Reliance Bancshares, Inc., which we refer to as Reliance, will hold a special meeting of shareholders, which we refer to as the Reliance special meeting, which will be held virtually via live webcast at [ ], on [ ], 2019, at [ ] Central Time. The Reliance special meeting will be held for the purposes of allowing holders of Reliance common stock to consider and vote upon the following matters:
| · | a proposal to approve the Agreement and Plan of Merger, dated as of November 13, 2018, which we refer to as the merger agreement, by and between Simmons First National Corporation, which we refer to as Simmons, and Reliance, pursuant to which, among other things, (i) Reliance will merge with and into Simmons, with Simmons continuing as the surviving corporation, which we refer to as the merger, and (ii) simultaneously with the merger, Reliance Bank will merge with and into Simmons Bank, with Simmons Bank continuing as the surviving bank, which we refer to as the bank merger and, together with the merger, as the mergers, each as more fully described in the attached proxy statement/prospectus, which we refer to as the merger proposal; and | |
| · | a proposal to approve one or more adjournments of the Reliance special meeting, if necessary or appropriate, to solicit additional proxies in favor of approval of the merger proposal, which we refer to as the adjournment proposal. |
These proposals are described in greater detail in the accompanying proxy statement/prospectus. Reliance will transact no other business at the Reliance special meeting, except for the business properly brought before the Reliance special meeting or any adjournment or postponement thereof.
Reliance has fixed the close of business on [ ] as the record date for the Reliance special meeting. Only holders of record of Reliance common stock at that time are entitled to notice of, and to vote at, the Reliance special meeting, or any adjournment or postponement thereof. Approval of the merger proposal requires the affirmative vote of holders of at least two-thirds of the outstanding shares of Reliance common stock entitled to vote on the merger proposal. Approval of the adjournment proposal requires the affirmative vote of holders of at least a majority of the shares present electronically or represented by proxy at the Reliance special meeting and entitled to vote on the adjournment proposal. At the close of business on the record date, [75,716,428] shares of Reliance common stock were outstanding and entitled to vote.
Your vote is very important. Simmons and Reliance cannot complete the mergers unless holders of Reliance common stock approve the merger agreement.
To ensure your representation at the Reliance special meeting, please complete, sign, date and return the enclosed proxy card or submit your proxy by telephone or the internet by following the instructions on your proxy card. If your shares of Reliance common stock are held in “street name” by a bank, broker or other nominee, please follow the instructions on the voting instruction form provided by the record holder. Shares of Reliance common stock that are subject to an irrevocable proxy previously granted to Thomas H. Brouster, Sr. will be voted by Mr. Brouster in favor of the merger proposal and the adjournment proposal, and the voting of those shares will not be directed by the holder of record of such shares. Because the Reliance special meeting is virtual and is being conducted electronically, shareholders will not be able to attend the Reliance special meeting in person. During the virtual meeting, you may ask questions and will be able to vote your shares electronically. To participate, you will need the 16-digit control number provided on the proxy card. Additional directions for participating in the Reliance special meeting are available at [ ]. We encourage you to allow ample time for online check-in, which will begin at [ ] Central Time.
Under Missouri law, holders of Reliance common stock who do not vote in favor of the merger proposal and follow certain procedural steps will be entitled to dissenters’ rights. See the section entitled “Questions and Answers—Are Reliance shareholders entitled to dissenters’ rights?”
The enclosed proxy statement/prospectus provides a detailed description of the Reliance special meeting, the mergers, the merger agreement, the documents related to the mergers, and other related matters. We urge you to read the proxy statement/prospectus, including any documents incorporated in the proxy statement/prospectus by reference, and its annexes, carefully and in their entirety.
The Reliance board of directors has unanimously approved the merger agreement and the transactions contemplated thereby and recommends that holders of Reliance common stock vote “FOR” the merger proposal and “FOR” the adjournment proposal.
BY ORDER OF THE BOARD OF DIRECTORS
Thomas H. Brouster, Sr.
Chairman
Frontenac, Missouri
[ ], 2019
ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and financial information about Simmons from documents filed with the U.S. Securities and Exchange Commission, or the SEC, that are not included in or delivered with this proxy statement/prospectus. You can obtain any of the documents filed with or furnished to the SEC by Simmons at no cost from the SEC’s website at www.sec.gov. You will also be able to obtain these documents, free of charge, from Simmons at www.simmonsbank.com. The information provided on Simmons’ website is not a part of the accompanying proxy statement/prospectus and therefore is not incorporated by reference into the accompanying proxy statement/prospectus. You may also request copies of these documents concerning Simmons, including documents incorporated by reference in this proxy statement/prospectus, at no cost by contacting Simmons at the following address:
Simmons First National Corporation
501 Main
Street
P.O. Box 7009
Pine Bluff, Arkansas 71601
Attention: Patrick A. Burrow
Telephone: (870) 541-1000
Reliance does not have a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and is therefore not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act and, accordingly, does not file documents or reports with the SEC.
If you are a Reliance shareholder and have any questions concerning the Reliance special meeting, the mergers, the merger agreement or the proxy statement/prospectus, would like additional copies of the proxy statement/prospectus without charge or need help voting your shares of Reliance common stock, please contact Reliance at the following address:
Reliance Bancshares, Inc.
10401 Clayton Road
Frontenac, Missouri 63131
Attention:
Allan D. Ivie IV, President
Telephone: (314) 569-7200
These documents are available without charge upon written or oral request. To obtain timely delivery of these documents, you must request them no later than [ ], 2019 in order to receive them before the Reliance special meeting.
No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated [ ], 2019 and you should assume that the information in this proxy statement/prospectus is accurate only as of such date. You should assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of the date of such document. Neither the mailing of this document to Reliance shareholders nor the issuance by Simmons of shares of Simmons common stock or Simmons’ Series C Preferred Stock in connection with the merger will create any implication to the contrary. See “Where You Can Find More Information” for more details.
This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Except where the context otherwise indicates, information contained in this proxy statement/prospectus regarding Simmons has been provided by Simmons and information contained in this proxy statement/prospectus regarding Reliance has been provided by Reliance.
TABLE OF CONTENTS
Annex Index
| Annex A: | Agreement and Plan of Merger, dated as of November 13, 2018, by and between Simmons First National Corporation and Reliance Bancshares, Inc. |
| Annex B: | Form of Support and Non-Competition Agreement, by and among Simmons First National Corporation, Reliance Bancshares, Inc. and certain directors and shareholders of Reliance Bancshares, Inc. |
| Annex C: | Opinion of Sandler O’Neill & Partners, L.P. |
| Annex D: | Missouri Statutes Annotated Title XXIII § 351.455: Dissenters’ Rights for Reliance |
QUESTIONS AND ANSWERS ABOUT THE PROPOSED MERGERS AND THE RELIANCE SPECIAL MEETING
The following are some questions that you may have regarding the mergers and the Reliance special meeting of its shareholders, or the Reliance special meeting, and brief answers to those questions. We urge you to read carefully the remainder of this proxy statement/prospectus because the information in this section does not provide all of the information that might be important to you with respect to the mergers and the Reliance special meeting. Additional important information is also contained in the documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information.” Unless the context otherwise requires, references in this proxy statement/prospectus to Simmons refer to Simmons First National Corporation and its consolidated subsidiaries and references to Reliance refer to Reliance Bancshares, Inc. and its consolidated subsidiaries, and references to “we,” “our” and “us” refer to Simmons and Reliance together.
As described below, it is important to note that the amount of per share merger consideration may increase or decrease due to changes in the price of Simmons common stock or the fully diluted number of shares of Reliance common stock outstanding after the date hereof. As a result, the per share merger consideration shown throughout this proxy statement/prospectus is for illustrative purposes only based on the assumptions described herein.
| Q: | What are the mergers? |
| A: | Simmons and Reliance have entered into an Agreement and Plan of Merger, dated as of November 13, 2018, which we refer to as the merger agreement, pursuant to which, among other things, (i) Reliance will merge with and into Simmons, with Simmons continuing as the surviving corporation, which we refer to as the merger, and (ii) simultaneously with the merger, Reliance Bank will merge with and into Simmons Bank, with Simmons Bank continuing as the surviving bank, which we refer to as the bank merger and, together with the merger, as the mergers. A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus. Following the merger, the shares of Class A Common Stock, par value $0.25, of Reliance, or Reliance common stock, will no longer trade on the OTC Market Group Inc.’s OTC Pink Open Market, or the OTC Pink Market. |
| Q: | Why am I receiving this proxy statement/prospectus? |
| A: | Reliance is sending these materials to the holders of Reliance common stock, which we refer to as the Reliance shareholders, to help them decide how to vote their shares of Reliance common stock with respect to the matters to be considered at the Reliance special meeting. Shares of Reliance common stock that are subject to an irrevocable proxy previously granted to Thomas H. Brouster, Sr. will be voted by Mr. Brouster, and the voting of those shares will not be directed by the holder of record of such shares.
The mergers cannot be completed unless the Reliance shareholders vote to approve the merger agreement and the transactions contemplated thereby, including the merger. The proposal to approve the merger agreement and the transactions contemplated thereby, including the merger, which we refer to as the merger proposal, requires the affirmative vote of holders of at least two-thirds of the outstanding shares of Reliance common stock entitled to vote on the merger proposal. Reliance is holding a special meeting of Reliance shareholders to vote on the proposals necessary to complete the mergers as well as other related matters. Information about the Reliance special meeting, the mergers and the other business to be considered by Reliance shareholders at the Reliance special meeting is contained in this proxy statement/prospectus.
This document constitutes both a proxy statement of Reliance and a prospectus of Simmons. It is a proxy statement because the board of directors of Reliance, or the Reliance board of directors, is using this document to solicit proxies from the Reliance shareholders. This document is also a prospectus because Simmons, in connection with the merger, is offering shares of Class A Common Stock, par value $0.01 per share, of Simmons, which we refer to as Simmons common stock, in exchange for outstanding shares of Reliance common stock, and shares of 7% Perpetual Convertible Preferred Stock, par value $0.01 per share, Series C of Simmons, which we refer to as Simmons series C preferred stock, in exchange for outstanding shares of 7% Perpetual Convertible Preferred Stock, no par value, Series C of Reliance, which we refer to as Reliance series C preferred stock. |
| 1 |
| Q: | What will holders of Reliance common stock receive in the merger? |
| A: | Based on the assumptions set forth below, at the time the merger is completed, which we refer to as the effective time, each share of Reliance common stock that is issued and outstanding immediately prior to the effective time, excluding certain specified shares, will be converted into the right to receive, subject to possible adjustment, (i) [ ] shares of Simmons common stock, which we refer to as the per share stock consideration, and (ii) $[ ] in cash, which we refer to as the per share cash consideration and together with the per share stock consideration, the per share merger consideration. The per share cash consideration and the per share stock consideration are based on the following assumptions: (i) [ ] shares of Reliance common stock are subject to outstanding stock options of Reliance with a weighted average exercise price of $[ ], (ii) [ ] shares of Reliance common stock are subject to outstanding warrants of Reliance with a weighted average exercise price of $[ ], (iii) all outstanding indebtedness of Reliance that is convertible into Reliance common stock, which we refer to as the Reliance convertible debt, is converted into [ ] shares of Reliance common stock immediately prior to the effective time; (iv) [ ] shares of Reliance’s Series C Preferred Stock are outstanding as of the effective time, (v) no shares of Reliance’s Series C Preferred Stock are converted as of the effective time, (vi) all shares of Reliance’s Series C Preferred Stock are converted to shares of Simmons series C preferred stock in connection with the merger, and (vii) [ ] shares of Reliance common stock are issued and outstanding, which includes the shares of Reliance common stock to be issued upon conversion of the Reliance convertible debt. In addition, we have assumed that the average closing price of Simmons common stock prior to the effective time is equal to $[ ], which is the closing sales price on the last practicable trading day prior to printing this proxy statement/prospectus. In the aggregate, Simmons will issue 4,000,000 shares of Simmons common stock, which we refer to as the stock consideration, and pay $62,700,000 (minus the cash payment for outstanding stock options of Reliance, the cash payment for outstanding warrants of Reliance, shares and cash reserved for the conversion or redemption of the Reliance Series C Preferred Stock and subject to certain other adjustments pursuant to the merger agreement), which we refer to as the cash consideration and together with the stock consideration, the merger consideration, to the Reliance shareholders upon completion of the merger, in addition to the issuance of Simmons preferred stock, as defined below, with an aggregate liquidation value of approximately $42.1 million to holders of Reliance preferred stock, as defined below.
Simmons will not issue any fractional shares of Simmons common stock in the merger. Instead, a Reliance shareholder who would otherwise be entitled to receive a fraction of a share of Simmons common stock will receive, in lieu thereof, an amount in cash, rounded up to the nearest cent (without interest), determined by multiplying (i) the fraction of a share (rounded to the nearest thousandth when expressed as a decimal form) of Simmons common stock that such shareholder would otherwise be entitled to receive by (ii) the average of the daily closing prices of shares of Simmons common stock for the 20 consecutive full trading days on which shares are actually traded on the Nasdaq Global Select Market, or Nasdaq, ending at the close of trading on the tenth business day prior to the date on which the merger becomes effective, or the closing date, (or the immediately preceding day to the tenth business day prior to the closing date if shares of Simmons common stock are not actually traded on Nasdaq on such day), which we refer to as the determination date, and which average which we refer to as the Simmons average closing price.
Following completion of the merger, it is currently expected that former Reliance shareholders as a group will own approximately [ ]% of the combined company’s common stock and existing Simmons shareholders as a group will own approximately [ ]% of the combined company’s common stock, assuming the current shares of Reliance series C preferred stock outstanding are not converted into shares of Reliance common stock prior to the effective time and the Reliance convertible debt is converted into [ ] shares of Reliance common stock immediately prior to the effective time. |
| Q: | What will holders of Reliance preferred stock receive in the merger? |
| A: | Each share of Fixed Rate Cumulative Perpetual Preferred Stock, no par value, Series A of Reliance, which we refer to as Reliance series A preferred stock, and Fixed Rate Cumulative Perpetual Preferred Stock, no par value, Series B of Reliance, which we refer to as Reliance series B preferred stock, issued and outstanding immediately prior to the effective time will be converted into the right to receive one share of Series A Preferred Stock, par value $0.01 per share, of Simmons, which we refer to as Simmons series A preferred stock, or Series B Preferred Stock, par value $0.01 per share, of Simmons, which we refer to as Simmons series B preferred stock, respectively. Each holder of shares of Reliance series C preferred stock, which together with Reliance series A preferred stock and Reliance series B preferred stock we refer to collectively as the Reliance preferred stock, will receive for each such share of Reliance series C preferred stock one share of Simmons series C preferred stock, which together with Simmons series A preferred stock and series B preferred stock we refer to collectively as the Simmons preferred stock, unless such holder of Reliance series C preferred stock affirmatively elects five days prior to the closing date to receive either (i) $1,000 per share plus any accrued and unpaid dividends, or the series C liquidation preference, or (ii) the per share merger consideration that would be payable if such share had been converted to Reliance common stock prior to the effective time, which together with the shares to be received by holders of Reliance series A preferred stock and Reliance series B preferred stock upon completion of the merger we refer to as the preferred stock consideration. The aggregate liquidation preference of the Simmons preferred stock to be issued to holders of Reliance preferred stock will be approximately $42.1 million. For more information on the Simmons series C preferred stock, see the section entitled “Description of New Simmons Series C Preferred Stock.” |
| 2 |
| Q: | Will the value of the per share merger consideration change between the date of this proxy statement/prospectus and the effective time? |
| A: | Yes. The amount of per share merger consideration may increase or decrease due to changes in the price of Simmons common stock or the fully diluted number of shares of Reliance common stock outstanding after the date hereof. Any change in the market price of Simmons common stock prior to the completion of the merger will affect the market value of the per share stock consideration that Reliance shareholders will receive upon completion of the merger.
Other than as described in this proxy statement/prospectus, there will be no adjustment to the merger consideration based upon changes in the market price of Simmons common stock or Reliance common stock prior to the effective time. Upon the terms and subject to the conditions of the merger agreement, if the Simmons average closing price is more than $37.68 and the difference between the percentage change in Simmons average closing price and the percentage change in the Nasdaq Bank Index exceeds 20% over a designated measurement period, then the cash consideration will be decreased by an amount in cash such that the total value of the merger consideration is not greater than $213,420,000. In addition, the merger agreement cannot be terminated due to a change in the price of Simmons common stock or Reliance common stock, except if the Simmons average closing price is less than $25.12 and the difference between the percentage change in the Nasdaq Bank Index and the percentage change in the Simmons average closing price exceeds 20% over a designated measurement period, unless Simmons agrees to increase the cash consideration by an amount in cash such that the total value of the merger consideration is not less than $163,180,000. |
| Q: | What will happen to Reliance stock options in the merger? |
| A: | At the effective time, each option granted by Reliance to purchase shares of Reliance common stock under existing stock plans of Reliance, which we refer to as a Reliance stock option, whether vested or unvested, outstanding immediately prior to the effective time will be canceled and converted into the right to receive from Simmons a cash payment equal to the difference, if positive, between (1) the fully diluted per share value (as described below) and (2) the exercise price of such Reliance stock option, which we refer to as the Reliance stock option payout. Fully diluted per share value means the quotient obtained by dividing (A) the sum of (i) the cash consideration, (ii) the product of (u) the stock consideration and (v) the Simmons average closing price, (iii) the product of (w) the total number of shares of Reliance common stock underlying the Reliance stock options outstanding immediately prior to the effective time, which we refer to as the Reliance stock options outstanding and (x) the weighted average option exercise price for such Reliance stock options, and (iv) the product of (y) the total number of shares of Reliance common stock underlying the warrants granted by Reliance to purchase shares of Reliance common stock, which we refer to as Reliance warrants, outstanding immediately prior to the effective time, which we refer to as the Reliance warrants outstanding, and (z) the weighted average warrant exercise price for such Reliance warrants, by (B) the sum of (i) the total number of shares of Reliance common stock, (ii) the total number of shares of Reliance common stock into which the Reliance series C preferred stock may be converted, (iii) the Reliance stock options outstanding, and (iv) the Reliance warrants outstanding, each as of immediately prior to the effective time. |
| 3 |
| Q: | What will happen to Reliance warrants in the merger? |
| A: | At the effective time, each Reliance warrant outstanding and unexercised immediately prior to the effective time will be canceled and converted into the right to receive from Simmons a cash payment, equal to the difference, if positive, between (1) the fully diluted per share value and (2) the exercise price of such Reliance warrant, which we refer to as a Reliance warrant payout.
|
| Q: | When do you expect to complete the mergers? |
| A: | We expect to complete the mergers in the second quarter of 2019. However, we cannot assure you of when or if the mergers will be completed. We must first obtain the approval of the Reliance shareholders, as well as obtain necessary regulatory approvals and satisfy certain other closing conditions. For further information, please see the section entitled “The Merger Agreement—Conditions to Consummation of the Mergers.” |
| Q: | What am I being asked to vote on? |
| A: | Reliance shareholders are being asked to vote on the following: | ||
| · | a proposal to approve the merger agreement, a copy of which is attached as Annex A, and the transactions contemplated thereby, including the merger, which we refer to as the merger proposal; and | ||
| · | a proposal to approve one or more adjournments of the Reliance special meeting, if necessary or appropriate, to solicit additional proxies in favor of approval of the merger proposal, which we refer to as the adjournment proposal. | ||
| Reliance shareholder approval of the merger proposal is required to complete the mergers. Reliance will transact no other business at the Reliance special meeting, except for the business properly brought before the Reliance special meeting or any adjournment or postponement thereof. | |||
| Q: | How does the Reliance board of directors recommend that Reliance shareholders vote at the Reliance special meeting? |
| A: | The Reliance board of directors has unanimously approved the merger agreement and unanimously recommends that Reliance shareholders vote “FOR” the merger proposal and “FOR” the adjournment proposal. |
| Q: | When and where is the Reliance special meeting? |
| A: | The Reliance special meeting will be held virtually via live webcast at [ ], on [ ], 2019, at [ ] Central Time. Because the Reliance special meeting is virtual and is being conducted electronically, shareholders will not be able to attend the Reliance special meeting in person. During the virtual meeting, you may ask questions and will be able to vote your shares electronically. To participate, you will need the 16-digit control number provided on the proxy card. Additional directions for participating in the Reliance special meeting are available at [ ]. We encourage you to allow ample time for online check-in, which will begin at [ ] Central Time. |
| Q: | What constitutes a quorum for the Reliance special meeting? |
| A: | The presence at the Reliance special meeting, electronically or by proxy, of a majority of the shares of Reliance common stock outstanding and entitled to vote as of [ ], 2019, the record date for the Reliance special meeting, which we refer to as the Reliance record date, will constitute a quorum for the purposes of the Reliance special meeting. All shares of Reliance common stock represented at the meeting or represented by proxy, including abstentions, if any, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the Reliance special meeting. |
| 4 |
| Q: | Who is entitled to vote? |
| A: | Holders of record of Reliance common stock at the close of business on [ ], 2019, which is the date that the Reliance board of directors has fixed as the Reliance record date, will be entitled to vote at the Reliance special meeting. |
| Q: | Will holders of Reliance preferred stock be entitled to vote at the Reliance special meeting? |
| A: | No. The Reliance preferred stock does not have voting rights with respect to any of the proposals that will be considered at the Reliance special meeting. Holders of Reliance preferred stock will not be entitled to vote at the Reliance special meeting, and should not submit a proxy card with respect to the Reliance special meeting or otherwise attempt to vote with respect to their Reliance preferred stock. |
| Q: | What is the vote required to approve each proposal at the Reliance special meeting? |
| A: | Merger Proposal: · Standard: Approval of the merger proposal requires the affirmative vote of holders of at least two-thirds of the outstanding shares of Reliance common stock entitled to vote on the merger proposal. · Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy card, fail to either submit a proxy card or vote by telephone or the internet or at the Reliance special meeting, or are a “street name” holder and fail to instruct your bank, broker or other nominee how to vote, it will have the same effect as a vote against the merger proposal. Adjournment Proposal: · Standard: Approval of the adjournment proposal requires the affirmative vote of at least a majority of shares present electronically or represented by proxy at the Reliance special meeting and entitled to vote on the adjournment proposal. · Effect of abstentions and broker non-votes: If you mark “ABSTAIN” on your proxy card, it will have the same effect as a vote against the adjournment proposal, and if you fail to either submit a proxy card or vote by telephone or the internet or at the Reliance special meeting, or are a “street name” holder and fail to instruct your bank, broker or other nominee how to vote, it will have no effect on such proposal. |
| Q: | Are there any voting agreements with existing shareholders? |
| A: | Yes. In connection with entering into the merger agreement, each of Thomas H. Brouster, Sr., the chairman of Reliance and the chairman and chief executive officer of Reliance Bank, and Gaines S. Dittrich, the vice chairman of Reliance and the vice chairman & chief credit officer of Reliance Bank, in their capacities as individuals, have separately entered into support and non-competition agreements, which we refer to as the Reliance voting agreements, pursuant to which they agreed to vote their beneficially owned shares of Reliance common stock in favor of the merger proposal and certain related matters and against alternative transactions. Mr. Brouster is the holder of irrevocable proxies previously granted by certain of Reliance’s shareholders that give Mr. Brouster sole authority to vote [34,647,909] shares of Reliance common stock as of the Reliance record date in addition to the shares of Reliance common stock owned of record by him. Pursuant to the Reliance voting agreement that Mr. Brouster entered into, these shares of Reliance common stock will be voted in favor of the merger proposal and certain related matters and against alternative transactions. As of the Reliance record date, shares constituting approximately [53.6]% of the Reliance common stock entitled to vote at the Reliance special meeting are subject to Reliance voting agreements. For further information, please see the section entitled “The Merger Agreement—Voting Agreements.” |
| Q: | Why is my vote important? |
| A: | If you do not vote, it will be more difficult for Reliance to obtain the necessary quorum to hold the Reliance special meeting. Additionally, each proposal must be approved by the voting requirements described above. The Reliance board of directors unanimously recommends that Reliance shareholders vote “FOR” the merger proposal and “FOR” the adjournment proposal |
| 5 |
| Q: | How many votes do I have? |
| A: | Each holder of shares of Reliance common stock outstanding on the Reliance record date will be entitled to one vote for each share held of record. As of the Reliance record date, there were [75,716,428] shares of Reliance common stock outstanding and entitled to vote at the Reliance special meeting. As of the Reliance record date, the directors and executive officers of Reliance and their affiliates beneficially owned and were entitled to vote approximately [40,608,521] shares of Reliance common stock, representing approximately [53.6%] of the shares of Reliance common stock outstanding on that date. |
| Q: | What do I need to do now? |
| A: | After carefully reading and considering the information contained in this proxy statement/prospectus, including any documents incorporated in this proxy statement/prospectus by reference, and its annexes, please complete, sign, date and return the enclosed proxy card and return it in the enclosed envelope or vote by telephone or the internet as soon as possible so that your shares will be represented at the Reliance special meeting. Shares of Reliance common stock that are subject to an irrevocable proxy previously granted to Thomas H. Brouster, Sr. will be voted by Mr. Brouster, and the voting of those shares will not be directed by the holder of record of such shares.
Please follow the instructions set forth on the proxy card or on the voting instruction form provided by the record holder if your shares are held in “street name” by a bank, broker or other nominee. |
| Q: | How do I vote? |
| A: | If you hold your shares of Reliance common stock in your name as a shareholder of record, you may use one of the following methods to submit a proxy as a Reliance shareholder: · through the internet by visiting [ ] and following the instructions, using the control number provided on your proxy card; · by telephone by calling [ ] and following the recorded instructions, using the control number provided on your proxy card; or · by mail by completing, signing, dating and returning the proxy card in the enclosed envelope, which requires no additional postage if mailed in the United States. If your shares are held in “street name” by a bank, broker or other nominee, that institution will send you separate instructions describing the procedure for voting your shares. You may not vote shares held in “street name” by returning a proxy card directly to Reliance or by voting at the Reliance special meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker or other nominee. |
| Q: | If my shares of common stock are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee automatically vote my shares for me? |
| A: | No. If your shares are held in “street name” by a bank, broker or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your bank, broker or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card directly to Reliance or by voting at the Reliance special meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker or other nominee.
Under stock exchange rules, banks, brokers and other nominees who hold shares of Reliance common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers and other nominees are not allowed to exercise voting discretion with respect to the approval of matters determined to be “non-routine,” without specific instructions from the beneficial owner. Reliance expects that all proposals to be voted on at the Reliance special meeting will be “non-routine” matters. Broker non-votes are shares held by a bank, broker or other nominee with respect to which such entity is not instructed by the beneficial owner of such shares to vote on the particular proposal and the broker does not have discretionary voting power on such proposal. If you are a Reliance shareholder and you do not instruct your bank, broker or other nominee on how to vote your shares: · your bank, broker or other nominee may not vote your shares on the merger proposal, which broker non-votes will have the same effect as a vote against such proposal; · your bank, broker or other nominee may not vote your shares on the adjournment proposal, which broker non-votes will have no effect on such proposal. |
| 6 |
| Q: | What if I abstain or do not vote? |
| A: | For purposes of the Reliance special meeting, an abstention occurs when a Reliance shareholder attends the Reliance special meeting, either electronically or represented by proxy, but abstains from voting on one or more proposals.
With respect to the merger proposal, if you mark “ABSTAIN” on your proxy card, fail to either submit a proxy card or vote by telephone or the internet or at the Reliance special meeting, or are a “street name” holder and fail to instruct your bank, broker or other nominee how to vote, it will have the same effect as a vote against the merger proposal. With respect to the adjournment proposal, if you mark “ABSTAIN” on your proxy card, it will have the same effect as a vote against the adjournment proposal, and if you fail to either submit a proxy card or vote by telephone or the internet or at the Reliance special meeting, or are a “street name” holder and fail to instruct your bank, broker or other nominee how to vote, it will have no effect on such proposal. |
| Q: | What will happen if I return my proxy card without indicating how to vote? |
| A: | If any proxy card is returned without indication as to how to vote, the shares of Reliance common stock represented by the proxy card will be voted as recommended by the Reliance board of directors with respect to each proposal. |
| Q: | May I change my vote after I have delivered my proxy card or voted by telephone or internet? |
| A: | Yes. You may change your vote at any time before your proxy is voted at the Reliance special meeting. You may do so in one of four ways: · by completing, signing, dating and returning a proxy card with a later date, · by delivering a written revocation letter to Reliance’s corporate secretary, · by voting via live webcast at the Reliance special meeting at [ ], or · by voting by telephone or the internet at a later time (but prior to the internet and telephone voting deadline). If your shares are held in “street name” by a bank, broker or other nominee, you should follow the instructions of your bank, broker or other nominee regarding the revocation of voting instructions. |
| Q: | Are Reliance shareholders entitled to dissenters’ rights? |
| A: | Reliance shareholders who do not vote in favor of the merger proposal and follow certain procedural steps will be entitled to dissenters’ rights under Section 351.455 of the Missouri General Business Corporation Law, or MGBCL. For further information, see “The Mergers—Appraisal and Dissenters’ Rights.” In addition, a copy of Section 351.455 of the MGBCL is attached as Annex D to this proxy statement/prospectus. |
| 7 |
| Q: | What are the material U.S. federal income tax consequences of the merger to shareholders of Reliance? |
| A: | The respective obligations of Simmons and Reliance to complete the mergers are conditioned upon receiving a legal opinion from Covington & Burling LLP, or Covington, to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, or the Code. Neither Simmons nor Reliance currently intends to waive these conditions to the consummation of the mergers. In the event that Simmons or Reliance waives the condition to receive such tax opinion and the tax consequences of the merger materially change, then Reliance will recirculate appropriate soliciting materials and seek new approval of the merger from Reliance shareholders. If the merger qualifies as a reorganization within the meaning of Section 368(a) of the Code, for U.S. federal income tax purposes: · A shareholder of Reliance that either (x) exchanges its Reliance common stock for the per share
stock consideration and the per share cash consideration (other than cash received in lieu of fractional shares of Simmons
common stock) or (y) elects to exchange its Reliance series C preferred stock for the per share merger consideration generally will (1) not recognize any loss upon surrendering its Reliance common stock or Reliance series C preferred stock and (2) recognize
gain upon surrendering its Reliance common stock or Reliance series C preferred stock equal to the excess, if any, of (a) the sum of the amount of per share
cash consideration received plus the fair market value (determined as of the effective time) of the per share stock consideration
over (b) the holder’s aggregate adjusted tax basis in the shares of Reliance common stock or Reliance series C preferred stock surrendered, but only
to the extent of the amount of per share cash consideration received. Reliance shareholders receiving cash in lieu of
fractional shares of Simmons common stock will generally recognize gain or loss equal to the difference between the amount
of cash received instead of a fractional share and the basis in its fractional share of Simmons common stock. · A holder of Reliance preferred stock that exchanges its Reliance preferred stock for Simmons preferred stock generally will not recognize gain or loss. A holder of Reliance series C preferred stock that elects to receive the series C liquidation preference will recognize gain or loss equal to the difference between the amount of cash received and the basis in the Reliance series C preferred stock exchanged therefor. For further information, see the section entitled “Material U.S. Federal Income Tax Consequences Relating to the Merger.” The U.S. federal income tax consequences described above may not apply to all shareholders of Reliance. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your independent tax advisor for a full understanding of the particular tax consequences of the merger to you. |
| Q: | If I am a shareholder of Reliance, should I send in my stock certificates now? |
| A: | No. Shareholders of Reliance SHOULD NOT send in any Reliance common stock or Reliance preferred stock certificates now. If the merger proposal is approved by Reliance shareholders and consummated, transmittal materials with instructions for their completion will be provided to holders of Reliance common stock and holders of Reliance preferred stock after the effective time and under separate cover and the stock certificates should be sent at that time. |
| Q: | What should I do if I have my shares of Reliance common stock in book-entry form? |
| A: | If the merger occurs, you are not required to take any special additional action to receive the per share merger consideration if your shares of Reliance common stock are held in book-entry form. After the completion of the merger, shares of Reliance common stock held in book-entry form will be exchanged automatically for the per share merger consideration, including shares of Simmons common stock in book-entry form, the per share cash consideration and any cash to be paid in lieu of fractional shares in the merger. |
| 8 |
| Q: | Whom may I contact if I cannot locate my Reliance stock certificate(s)? |
| A: | If you are unable to locate your original Reliance stock certificate(s), you should contact Allan D. Ivie IV, Reliance’s President, at (314) 569-7200. |
| Q: | What should I do if I receive more than one set of voting materials? |
| A: | Reliance shareholders may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold shares of Reliance common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold such shares. If you are a Reliance shareholder and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive or otherwise follow the voting instructions set forth in this proxy statement/prospectus to ensure that you vote every share of Reliance common stock that you own. |
| Q: | What happens if I sell my shares of Reliance common stock after the Reliance record date but before the Reliance special meeting? |
| A: | The Reliance record date is earlier than the date of the Reliance special meeting and the date that the mergers are expected to be completed. If you transfer your shares of Reliance common stock after the Reliance record date but before the date of the Reliance special meeting, you will retain your right to vote at such meeting (provided that such shares remain outstanding on the date of such meeting), but you will not have the right to receive any per share merger consideration for the transferred shares of Reliance common stock. You will only be entitled to receive the per share merger consideration in respect of shares of Reliance common stock that you hold at the effective time. |
| Q: | Are there risks involved in undertaking the merger? |
| A: | Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 28. |
| Q: | What happens if the merger is not completed? |
| A: | If the merger is not completed, Reliance shareholders will not receive the per share merger consideration and holders of Reliance preferred stock will not receive the preferred stock consideration. Instead, each of Reliance and Simmons will remain an independent company and shares of common stock of each will continue to be traded on the OTC Pink Market and Nasdaq, respectively. |
| Q: | Whom should I contact if I have questions? |
| A: | If you need assistance in completing your proxy card, have questions regarding the Reliance special meeting, or would like additional copies of this proxy statement/prospectus, please contact Reliance’s President, Allan D. Ivie, IV, at (314) 569-7200. |
| Q: | Where can I find more information about Simmons and Reliance? |
| A: | You can find more information about Simmons and Reliance from the various sources described under the section entitled “Where You Can Find More Information.” |
| 9 |
The following summary highlights selected information in this proxy statement/prospectus and may not contain all the information that may be important to you. You should read carefully this entire proxy statement/prospectus, including any document incorporated by reference in this proxy statement/prospectus, and its annexes, because this section may not contain all of the information that may be important to you in determining how to vote. For a description of, and instructions as to how to obtain, this information, see the section entitled “Where You Can Find More Information.” Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more detail.
The Companies (page 41)
Simmons First National Corporation
501 Main Street
Pine Bluff, Arkansas 71601
Telephone: (870) 541-1000
Simmons is a financial holding company registered under the Bank Holding Company Act of 1956, as amended, or the BHC Act. Simmons is headquartered in Arkansas and as of September 30, 2018, had, on a consolidated basis, total assets of $16.3 billion, total net loans of $11.8 billion, total deposits of $12.1 billion and total shareholders’ equity of $2.2 billion. Simmons conducts its banking operations through its subsidiary bank, Simmons Bank, in 191 branches or financial centers located in communities in Arkansas, Colorado, Kansas, Missouri, Oklahoma, Tennessee and Texas. Simmons common stock is traded on Nasdaq under the symbol “SFNC.”
Additional information about Simmons and its subsidiaries is included in documents incorporated by reference in this proxy statement/prospectus. See the section entitled “Where You Can Find More Information.”
Reliance Bancshares, Inc.
10401 Clayton Road
Frontenac, MO 63131
Telephone: (314) 569-7200
Reliance is a bank holding company which was incorporated in Missouri in 1998. Reliance, through Reliance Bank, operates through 22 offices in Missouri and Illinois, all of which are in the St. Louis, Missouri metropolitan area. As of September 30, 2018, Reliance had, on a consolidated basis, total assets of $1.5 billion, total loans of $1.1 billion, total deposits of $1.2 billion. Reliance does not have a class of securities registered under Section 12 of the Exchange Act, is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, and, accordingly, does not file documents or reports with the SEC. Reliance common stock trades on the OTC Pink Market under the symbol “RLBS.”
The Mergers (page 43)
The terms and conditions of the mergers are contained in the merger agreement, which is attached to this proxy statement/prospectus as Annex A. We urge you to read the merger agreement carefully and in its entirety, as it is the legal document governing the mergers. All descriptions in this summary and elsewhere in this proxy statement/prospectus of the terms and conditions of the mergers are subject to, and qualified in their entirety by reference to, the merger agreement.
Under the terms and subject to the conditions of the merger agreement, among other things, (i) Reliance will merge with and into Simmons with Simmons continuing as the surviving corporation in the merger, and (ii) simultaneously with the merger, Reliance Bank will merge with and into Simmons Bank with Simmons Bank continuing as the surviving bank in the bank merger.
| 10 |
Based on the assumptions set forth below, at the effective time, each share of Reliance common stock that is issued and outstanding immediately prior to the effective time, excluding certain specified shares, will be converted into the right to receive, subject to possible adjustment, (i) [ ] shares of Simmons common stock with cash paid in lieu of fractional shares and (ii) $[ ] in cash. In addition, each share of Reliance series A preferred stock and Reliance series B preferred stock will be converted into the right to receive one share of Simmons series A preferred stock or Simmons series B preferred stock, respectively, and each holder of shares of Reliance series C preferred stock will receive for each such share of Reliance series C preferred stock one share of Simmons series C preferred stock unless such holder of Reliance series C preferred stock affirmatively elects five days prior to the closing date to receive either (i) the series C liquidation preference or (ii) the per share merger consideration that would be payable if such share had been converted to Reliance common stock prior to the effective time. The per share cash consideration and the per share stock consideration are based on the following assumptions: (i) [ ] shares of Reliance common stock are subject to outstanding Reliance stock options with a weighted average exercise price of $[ ], (ii) [ ] shares of Reliance common stock are subject to outstanding Reliance warrants with a weighted average exercise price of $[ ], (iii) all Reliance convertible debt is converted into [ ] shares of Reliance common stock immediately prior to the effective time; (iv) [ ] shares of Reliance series C preferred stock are outstanding as of the effective time, (v) no shares of Reliance series C preferred stock are converted as of the effective time, (vi) all shares of Reliance series C preferred stock are converted to shares of Simmons series C preferred stock in connection with the merger, and (vii) [ ] shares of Reliance common stock are issued and outstanding, which includes the shares of Reliance common stock to be issued upon conversion of the Reliance convertible debt. In addition, we have assumed that the Simmons average closing price prior to the effective time is equal to $[ ], which is the closing sales price on the last practicable trading day prior to printing this proxy statement/prospectus. In the aggregate, Simmons will issue 4,000,000 shares of Simmons common stock and pay $62,700,000 (minus the cash payment for outstanding stock options of Reliance, the cash payment for outstanding warrants of Reliance, shares and cash reserved for the conversion or redemption of the Reliance series C preferred stock and subject to certain other adjustments pursuant to the merger agreement) to the Reliance shareholders upon completion of the merger, in addition to the issuance of Simmons preferred stock with an aggregate liquidation value of approximately $42.1 million to holders of Reliance preferred stock.
Simmons will not issue any fractional shares of Simmons common stock in the merger. Instead, a Reliance shareholder who would otherwise be entitled to receive a fraction of a share of Simmons common stock will receive, in lieu thereof, an amount in cash, rounded up to the nearest cent (without interest), determined by multiplying (i) the fraction of a share (rounded to the nearest thousandth when expressed as a decimal form) of Simmons common stock that such shareholder would otherwise be entitled to receive by (ii) the Simmons average closing price.
The market value of the per share stock consideration will fluctuate with the price of Simmons common stock, and at the time of the special meeting of Reliance shareholders, Reliance shareholders will not know or be able to calculate the value of the per share merger consideration to be received upon completion of the merger. Based on the closing sale price of Simmons common stock on November 12, 2018, the last trading day before the public announcement of the signing of the merger agreement, the implied value of the per share merger consideration payable for each share of Reliance common stock was $[ ]. Based upon the closing sale price of Reliance common stock of $[ ] on [ ], 2019, the last practicable trading day prior to printing this proxy statement/prospectus, the implied value of the per share merger consideration was $[ ], in each case using the same assumptions described above other than the Simmons average closing price, which is assumed to be the closing sales price of Simmons common stock set forth above as of such date.
Treatment of Reliance Stock Options (page 73)
At the effective time, each Reliance stock option, whether vested or unvested, outstanding immediately prior to the effective time, will be canceled and converted into the right to receive from Simmons a cash payment equal to the difference, if positive, between (1) the fully diluted per share value and (2) the exercise price of such Reliance stock option.
Treatment of Reliance Warrants (page 73)
At the effective time, each Reliance warrant that is outstanding and unexercised immediately prior to the effective time will be canceled and converted into the right to receive from Simmons a cash payment, equal to the difference, if positive, between (1) the fully diluted per share value and (2) the exercise price of such Reliance warrant.
| 11 |
Treatment of Reliance Preferred Stock (page 73)
At the effective time, each share of Reliance series A preferred stock and Reliance series B preferred stock issued and outstanding immediately prior to the effective time will be converted into the right to receive one share of Simmons series A preferred stock or Simmons series B preferred stock, respectively, each of which will have such rights, preference, privileges, and voting powers, and limitations and restrictions thereof, which, taken as a whole, are not materially less favorable to the holders of Reliance series A preferred stock and Reliance series B preferred stock, respectively, than the rights, preferences, privileges, and voting powers, and limitations and restrictions thereof, of the Reliance series A preferred stock and Reliance series B preferred stock, respectively, that are in effect immediately prior to the effective time, taken as a whole. Each holder of shares of Reliance series C preferred stock will receive for each such share of Reliance Series C preferred stock one share of Simmons series C preferred stock, which will have such rights, preference, privileges, and voting powers, and limitations and restrictions thereof, which, taken as a whole, are not materially less favorable to the holders of Reliance series C preferred stock that are in effect immediately prior to the effective time, taken as a whole, unless such holder affirmatively elects five days prior to the closing date to receive either (i) the series C liquidation preference or (ii) the per share merger consideration that would be payable if such share had been converted to Reliance common stock prior to the effective time. The aggregate liquidation preference of the Simmons preferred stock to be issued to holders of Reliance preferred stock will be approximately $42.1 million. For more information on the Simmons series C preferred stock, see the section entitled “Description of New Simmons Series C Preferred Stock.”
For any share of Reliance series C preferred stock that is issued and outstanding immediately prior to the effective time, which is converted into a share of Simmons series C preferred stock in connection with the merger, which we refer to as a subject share, Simmons will withhold the per share merger consideration that would have been payable if such share had been converted to Reliance common stock and will make arrangements such that: (i) upon conversion of a share of Simmons series C preferred stock, the holder of such share will be entitled to the per share merger consideration withheld by Simmons for the subject share that the converted Simmons series C preferred stock replaced, and (ii) if a share of Simmons series C preferred stock is redeemed before it is converted, the per share merger consideration withheld by Simmons for the subject share that the redeemed Simmons series C preferred stock replaced will be canceled, and Simmons will pay the applicable redemption price to the holder of such share.
Reliance’s Reasons for the Mergers and Recommendation of the Reliance Board of Directors (page 48)
The Reliance board of directors has unanimously approved the merger agreement and unanimously recommends that Reliance shareholders vote “FOR” the merger proposal and “FOR” the adjournment proposal. Please see the section entitled “The Mergers—Reliance’s Reasons for the Mergers and Recommendation of the Reliance Board of Directors” for a more detailed discussion of the factors considered by the Reliance board of directors in reaching its decision to approve the merger agreement and the transactions contemplated thereby.
Opinion of Sandler O’Neill & Partners, L.P. (page 51)
On November 13, 2018, the Reliance board of directors received an oral opinion, which was subsequently confirmed in writing, from Sandler O’Neill & Partners, L.P., which we refer to as Sandler O’Neill, to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill as set forth in its opinion, the per share merger consideration was fair, from a financial point of view, to the holders of Reliance common stock. The full text of Sandler O’Neill’s opinion is attached as Annex C to this proxy statement/prospectus. Reliance shareholders should read the entire opinion carefully for a discussion of, among other things, the assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion.
| 12 |
Sandler O’Neill’s opinion speaks only as of the date of the opinion. The opinion was directed to the Reliance board of directors in connection with its consideration of the merger agreement and the merger and does not constitute a recommendation to any Reliance shareholder as to how such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the merger agreement and the merger. Sandler O’Neill’s opinion was directed only to the fairness, from a financial point of view, of the per share merger consideration to the holders of Reliance common stock and did not address the underlying business decision of Reliance to engage in the merger, the form or structure of the merger or any other transactions contemplated by the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for Reliance or the effect of any other transaction in which Reliance might engage.
For a description of the opinion that Reliance received from Sandler O’Neill, please refer to the section entitled “The Mergers—Opinion of Sandler O’Neill & Partners, L.P.”
Simmons’ Reasons for the Mergers (page 64)
The Simmons board of directors unanimously approved the merger agreement. Please see the section entitled “The Mergers—Simmons’ Reasons for the Mergers” for a more detailed discussion of the factors considered by the Simmons board of directors in reaching its decision to approve the merger agreement and the transactions contemplated thereby.
The Reliance Special Meeting (page 36)
The Reliance special meeting will be held virtually via live webcast at [ ], on [ ], 2019, at [ ] Central Time. At the Reliance special meeting, Reliance shareholders will be asked to consider and vote on the merger proposal and the adjournment proposal, if necessary or appropriate.
Reliance has set the close of business on [ ], 2019 as the Reliance record date to determine which Reliance shareholders will be entitled to receive notice of and vote at the Reliance special meeting. Each holder of shares of Reliance common stock outstanding on the Reliance record date will be entitled to one vote for each share held of record. As of the Reliance record date, there were [75,716,428] shares of Reliance common stock outstanding and entitled to vote at the Reliance special meeting. As of the Reliance record date, the directors and executive officers of Reliance and their affiliates beneficially owned and were entitled to vote approximately [40,608,521] shares of Reliance common stock, representing approximately [53.6]% of the shares of Reliance common stock outstanding on that date. Shares of Reliance common stock that are subject to an irrevocable proxy previously granted to Thomas H. Brouster, Sr. will be voted by Mr. Brouster, and the voting of those shares will not be directed by the holder of record of such shares.
Approval of the merger proposal requires the affirmative vote of holders of at least two-thirds of the outstanding shares of Reliance common stock entitled to vote on the merger proposal. Approval of the adjournment proposal requires the affirmative vote of holders of a at least a majority of the shares present electronically or represented by proxy at the Reliance special meeting and entitled to vote on the adjournment proposal.
With respect to the merger proposal, if you mark “ABSTAIN” on your proxy card, fail to either submit a proxy card or vote by telephone or the internet or at the Reliance special meeting, or are a “street name” holder and fail to instruct your bank, broker or other nominee how to vote, it will have the same effect as a vote against the merger proposal. With respect to the adjournment proposal, if you mark “ABSTAIN” on your proxy card, it will have the same effect as a vote against the adjournment proposal, and if you fail to either submit a proxy card or vote by telephone or the internet or at the Reliance special meeting, or are a “street name” holder and fail to instruct your bank, broker or other nominee how to vote, it will have no effect on such proposal.
| 13 |
Interests of Reliance’s Directors and Executive Officers in the Mergers (page 66)
In considering the recommendation of the Reliance board of directors, Reliance shareholders should be aware that some of Reliance’s executive officers and directors have interests in the merger, which may be considered to be different from, or in addition to, the interests of the Reliance shareholders generally. The Reliance board of directors was aware of these interests and considered them, among other matters, in reaching its decision to approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement and to recommend that Reliance shareholders vote “FOR” the merger proposal.
These interests are described in more detail under the section entitled “The Mergers—Interests of Reliance’s Directors and Executive Officers in the Mergers.”
Management and Board of Directors of Simmons after the Mergers (page 66)
The directors and officers of Simmons immediately prior to the effective time will serve as the directors and officers of the surviving corporation from and after the effective time in accordance with the bylaws of the surviving corporation.
Regulatory Approvals Required for the Mergers (page 68)
The completion of the mergers is subject to prior receipt of certain approvals and consents required to be obtained from applicable governmental and regulatory authorities. These approvals include approvals from, among others, the Board of Governors of the Federal Reserve System, or the Federal Reserve, and the Arkansas State Banking Department, or the ASBD. Simmons and Reliance have filed all necessary applications and notifications to obtain the required regulatory approvals, consents and waivers. Although neither Simmons nor Reliance knows of any reason why the parties cannot obtain regulatory approvals required to consummate the mergers in a timely manner, Simmons and Reliance cannot be certain of when or if such approvals will be obtained.
Accounting Treatment (page 69)
The merger will be accounted for as an acquisition by Simmons using the acquisition method of accounting in accordance with FASB ASC Topic 805, “Business Combinations.” The result of this is that (1) the recorded assets and liabilities of Simmons will be carried forward at their recorded amounts, (2) Simmons historical operating results will be unchanged for the prior periods being reported on, and (3) the assets and liabilities of Reliance will be adjusted to fair value at the date Simmons assumes control of the combined entity, or the merger date. In addition, all identifiable intangibles will be recorded at fair value and included as part of the net assets acquired. The amount by which the purchase price, consisting of the value of cash and shares of Simmons stock to be issued to former Reliance shareholders and cash to be issued to former holders of Reliance equity awards, exceeds the fair value of the net assets including identifiable intangibles of Reliance at the merger date will be reported as goodwill. In accordance with current accounting guidance, goodwill is not amortized and will be evaluated for impairment at least annually. Identified intangibles will be amortized over their estimated lives. Further, the acquisition method of accounting results in the operating results of Reliance being included in the operating results of Simmons from the closing date going forward.
Public Trading Markets (page 69)
Simmons common stock is listed on Nasdaq under the symbol “SFNC.” Reliance common stock trades on the OTC Pink Market under the symbol “RLBS.” Upon completion of the merger, Reliance common stock will no longer trade on the OTC Pink Market. The Simmons common stock issuable in the merger will be listed on Nasdaq.
Appraisal and Dissenters’ Rights (page 69)
Reliance shareholders who do not vote in favor of the merger proposal and follow certain procedural steps will be entitled to dissenters’ rights under Section 351.455 of the MGBCL. These procedural steps include, among others: (1) owning Reliance common stock as of the close of business on the Reliance record date, (2) delivering to Reliance prior to or at the Reliance special meeting a written objection to the merger, (3) not voting his or her shares in favor of approval of the merger proposal, and (4) timely filing a written demand after the effective time for payment of the fair value of his or her shares as of the day before the shareholder vote to approve the merger. For more information, see “The Mergers—Appraisal and Dissenters’ Rights.”
| 14 |
Agreement Not to Solicit Other Offers (page 84)
Reliance has agreed that it and its subsidiaries will not, and will cause their respective representatives not to, directly or indirectly:
| · | solicit, initiate, encourage (including by providing information or assistance), facilitate or induce any acquisition proposal (as defined in “The Merger Agreement—Agreement Not to Solicit Other Offers”); | |
| · | engage or participate in any discussions or negotiations regarding, or furnish or cause to be furnished to any person any information or data in connection with, or take any other action to facilitate any inquiries or the making of any offer or proposal that constitutes, or may reasonably be expected to lead to, an acquisition proposal; | |
| · | approve, agree to, accept, endorse or recommend any acquisition proposal; or | |
| · | approve, agree to, accept, endorse or recommend, or propose to approve, agree to, accept, endorse or recommend any acquisition agreement (as defined in “The Merger Agreement—Agreement Not to Solicit Other Offers”) contemplating or otherwise relating to any acquisition transaction (as defined in “The Merger Agreement—Agreement Not to Solicit Other Offers”). |
Reliance Special Meeting and Recommendation of the Reliance Board of Directors (page 85)
Reliance has agreed to hold a meeting of its shareholders as promptly as reasonably practicable after the registration statement of which this proxy statement/prospectus is a part is declared effective by the SEC for the purpose of obtaining the requisite Reliance shareholder approval of the merger agreement, which we refer to as the Reliance shareholder approval.
The Reliance board of directors has agreed to unanimously recommend to its shareholders the approval of the merger proposal to include such recommendation in this proxy statement/prospectus and to use its reasonable best efforts to obtain the Reliance shareholder approval. The Reliance board of directors and any committee thereof agreed to not withhold, withdraw, qualify or modify (or publicly propose to withhold, withdraw, qualify or modify) such recommendation in any manner adverse to Simmons, take any action or make any public statement, filing or release inconsistent with such recommendation, or submit the merger proposal to its shareholders without such recommendation, which we refer to as a change in recommendation.
However, at any time prior to the Reliance special meeting, the Reliance board of directors may make a change in recommendation (including approving, endorsing or recommending any acquisition proposal), if Reliance has received a superior proposal (as defined in “The Merger Agreement—Reliance Special Meeting and Recommendation of the Reliance Board of Directors”) (after giving effect to any revised offer from Simmons) and the Reliance board of directors has determined in good faith, after consultation with outside legal counsel, that the failure to take such action would be a violation of the directors’ fiduciary duties under applicable law; provided, that the Reliance board of directors may not make a change in recommendation unless:
| · | Reliance has complied in all material respects with its non-solicit obligations described above; | |
| · | Reliance gives Simmons at least five business days’ notice of its intention to make a change in recommendation and a reasonable description of the events or circumstances giving rise to its determination to take such action; | |
| · | during such five business day period, Reliance has, and has caused its financial advisors and outside legal counsel to, consider and negotiate with Simmons in good faith (to the extent Simmons desires to so negotiate) regarding any proposals, adjustments or modifications to the terms and conditions of the merger agreement proposed by Simmons; and | |
| · | the Reliance board of directors has determined in good faith, after consultation with outside legal counsel and considering the results of such negotiations described above and giving effect to any proposals, amendments or modifications proposed by Simmons that such superior proposal remains a superior proposal and that the failure to make a change in recommendation would be a violation of the directors’ fiduciary duties under applicable law and, in which event, the Reliance board of directors may communicate the basis for its lack of recommendation to its shareholders to the extent required by law. |
Any material amendment to any superior proposal will require a new determination and notice period.
| 15 |
Conditions to Consummation of the Merger (page 86)
The respective obligations of each party to consummate the mergers and the other transactions contemplated by the merger agreement are subject to the satisfaction or waiver at or prior to the effective time of the following conditions:
| · | the approval of the merger proposal by the Reliance shareholders; | |
| · | the receipt of all required regulatory approvals, waiver or non-objections from the Federal Reserve, Missouri Division of Finance, or the MDF, the ASBD, the Federal Deposit Insurance Corporation, or the FDIC, and any other regulatory authority and any other regulatory approvals or consents contemplated by the merger agreement, the failure of which to obtain would reasonably be expected to have, either individually or in the aggregate, a material adverse effect on Simmons and Reliance (considered as a consolidated entity), in each case required to consummate the transactions contemplated by the merger agreement, including the merger, and expiration of all related statutory waiting periods, which we refer to as the requisite regulatory approvals, without the imposition of a burdensome condition (as defined in “The Merger Agreement—Covenants and Agreements—Regulatory Matters”) as determined by Simmons in its sole discretion; | |
| · | the absence of any law or order (whether temporary, preliminary or permanent) by any court or regulatory authority of competent jurisdiction prohibiting, restricting or making illegal the consummation of the transactions contemplated by the merger agreement (including the merger); | |
| · | the effectiveness of the registration statement of which this proxy statement/prospectus is a part under the Securities Act of 1933, as amended, or the Securities Act, and there being no stop order, action, suit, proceeding or investigation by the SEC to suspend the effectiveness of the registration statement initiated and continuing; | |
| · | the approval of the listing on Nasdaq of the Simmons common stock to be issued pursuant to the merger; | |
| · | the execution and delivery of such other documents, instruments, understandings, or agreements in connection with the transactions contemplated by the merger agreement reasonably requested by the other party; | |
| · | the receipt by each party of a written opinion of Covington in form reasonably satisfactory to such parties to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code; | |
| · | the accuracy of the representations and warranties of the other party in the merger agreement as of the date of the merger agreement and as of the effective time, subject to the materiality standards provided in the merger agreement; | |
| · | the performance by the other party in all material respects of all agreements and covenants of such party required to be performed or complied with pursuant to the merger agreement and other agreements contemplated by the merger agreement prior to the effective time; and | |
| · | the receipt of (1) a certificate from the other party to the effect that the two conditions described immediately above have been satisfied and (2) certified copies of resolutions duly adopted by the other party’s board of directors and shareholders evidencing the taking of all corporate action necessary to authorize the execution, delivery and performance of the merger agreement, and the consummation of the transactions contemplated thereby, all in such reasonable detail as the other party and its counsel may request. |
| 16 |
In addition, Simmons’ obligation to consummate the mergers and the other transactions contemplated by the merger agreement is subject to the satisfaction or waiver at or prior to the effective time of the following conditions:
| · | delivery of a certificate stating that Reliance common stock is not a “United States real property interest” within the meaning of the Code, or a FIRPTA certificate, by Reliance to Simmons; | |
| · | as of the last day of the month reflected in Reliance’s closing financial statements, Reliance, or Reliance Bank as applicable where noted, having (1) a ratio of non-performing assets to total assets not in excess of 1.00%, (2) Reliance Bank having a ratio of classified assets to Tier 1 capital plus ALLL not in excess of 9.00%, (3) classified assets not in excess 115% of the aggregate balance of classified assets as set forth in Reliance’s financial statements as of and for the quarter ended September 30, 2018, and (4) a ratio of delinquent loans to total loans not in excess of 0.20%; | |
| · | holders of not more than five percent of the outstanding shares of Reliance common stock having demanded, properly and in writing, appraisal for such shares under the MGBCL; | |
| · | as reflected in Reliance’s closing financial statements, Reliance Bank (1) being “well capitalized” as defined under applicable law, (2) having a Tier 1 leverage ratio of not less than 10.10%, (3) having a Tier 1 risked-based capital ratio of not less than 11.35%, (4) having a total risked-based capital ratio of not less than 12.15%, and (5) having not received any notification from the MDF or FDIC to the effect that the capital of Reliance Bank is insufficient to permit Reliance Bank to engage in all aspects of its business and its currently proposed businesses without material restrictions, including the imposition of a burdensome condition, which condition we refer to as the regulatory capital condition; and | |
| · | Reliance having delivered evidence reasonably satisfactory to Simmons that certain contracts have been terminated. |
We cannot be certain of when, or if, the conditions to the mergers will be satisfied or waived, or that the mergers will be completed in the second quarter of 2019 or at all. As of the date of this proxy statement/prospectus, we have no reason to believe that any of these conditions will not be satisfied.
Termination of the Merger Agreement (page 88)
The merger agreement may be terminated and the mergers abandoned at any time prior to the effective time (notwithstanding the approval of the merger agreement by Reliance shareholders) by mutual written agreement, or by either party in the following circumstances:
| · | any regulatory authority denies a requisite regulatory approval, or any law or order permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by the merger agreement becomes final and nonappealable, so long as the party seeking to terminate the merger agreement has used its reasonable best efforts to contest, appeal and change or remove such denial, law or order; | |
| · | the Reliance shareholders fail to vote their approval of the merger proposal, which we refer to as a no-vote termination; | |
| · | the merger has not been consummated by November 30, 2019, which we refer to as the outside date, if the failure to consummate the transactions contemplated by the merger agreement on or before that date is not caused by the terminating party’s breach of the merger agreement, which we refer to as an outside date termination; or | |
| · | if there was a breach of any of the covenants or agreements (or any such representation or warranty ceases to be true) set forth in the merger agreement on the part of Reliance, in the case of a termination by Simmons, or Simmons, in the case of a termination by Reliance, which breach or failure to be true, either individually or in the aggregate with all other breaches by such party (or failures of such representations or warranties to be true), would constitute, if occurring or continuing on the closing date, the failure of a Simmons or Reliance condition to closing, respectively, and is not cured within 30 days following written notice or by its nature or timing cannot be cured during such period (or such fewer days as remain prior to the outside date); provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained in the merger agreement, which we refer to as a breach termination. |
| 17 |
In addition, Simmons may terminate the merger agreement if:
| · | the Reliance board of directors fails to recommend that the Reliance shareholders approve the merger proposal, effects a change in recommendation, breaches its non-solicitation obligations with respect to acquisition proposals in any respect adverse to Simmons or fails to call, give notice of, convene and/or hold the Reliance special meeting in accordance with the merger agreement, which, collectively, we refer to as a Reliance board breach termination; provided that Simmons right to terminate the merger agreement pursuant to a Reliance board breach expires in the event that, notwithstanding a change in recommendation, the merger and merger agreement are approved at the Reliance special meeting; | |
| · | if any regulatory authority grants a requisite regulatory approval but such requisite regulatory approval contains, results or would reasonably be expected to result in, the imposition of a burdensome condition; or | |
| · | if any regulatory authority requests in writing that Simmons, Reliance or any of their respective affiliates withdraw (other than for technical reasons), and not be permitted to resubmit within 60 days, any application with respect to a requisite regulatory approval. |
In addition, Reliance may terminate the merger agreement if:
| · | the Reliance board of directors determines by a vote of at least two-thirds of the members of the entire Reliance board of directors, at any time during the five-day period commencing with the determination date, (i) the Simmons average closing price is less than $25.12 and (ii) the difference between the percentage change in the Nasdaq Bank Index and the percentage change in the Simmons average closing price exceeds 20%, which termination right we refer to as a stock decline termination right. If Reliance elects to terminate the merger agreement pursuant to its stock decline termination right, it will give written notice to Simmons, and Simmons will have the option, in its sole and absolute discretion, within five days of the receipt of such notice of termination to increase the cash consideration by an amount in cash so the total value of the merger consideration is not less than $163,180,000. If Simmons so elects within such five-day period and notifies Reliance promptly of such election, then the merger agreement will remain in effect in accordance with its terms (except for the cash consideration will be so modified). |
Termination Fee (page 89)
Reliance will pay Simmons a $10,000,000 termination fee if:
| · | (1) either Reliance or Simmons effects an outside date termination or a no-vote termination, or (2) Simmons effects a breach termination and, in each case, within 12 months of such termination, Reliance consummates an acquisition transaction or enters into an acquisition agreement with respect to an acquisition transaction, whether or not such acquisition transaction is subsequently consummated; or | |
| · | Simmons effects a Reliance board breach termination. |
| 18 |
If Reliance fails to pay any termination fee payable when due, then Reliance must pay to Simmons its costs and expenses (including attorneys’ fees) in connection with collecting such fee, together with interest on the amount of such fee at the prime rate of Citibank, N.A. from the date such payment was due under the merger agreement until the date of payment.
Voting Agreements (page 90)
In connection with entering into the merger agreement, each of Thomas H. Brouster, Sr. and Gaines S. Dittrich, in their capacities as individuals, have separately entered into a Reliance voting agreement, pursuant to which they agreed to vote their beneficially owned shares of Reliance common stock in favor of the merger proposal and certain related matters and against alternative transactions. Mr. Brouster is the holder of irrevocable proxies previously granted by certain of Reliance’s shareholders that give Mr. Brouster sole authority to vote [34,647,909] shares of Reliance common stock as of the Reliance record date, in addition to the shares of Reliance common stock owned of record by him. Pursuant to the Reliance voting agreement that Mr. Brouster entered into, these shares of Reliance common stock will be voted in favor of the merger proposal and certain related matters and against alternative transactions. As of the Reliance record date, shares constituting approximately [53.6]% of the Reliance common stock entitled to vote at the Reliance special meeting are subject to Reliance voting agreements.
Material U.S. Federal Income Tax Consequences Relating to the Merger (page 91)
The respective obligations of Simmons and Reliance to complete the mergers are conditioned upon receiving a legal opinion from Covington to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, or the Code. Neither Simmons nor Reliance currently intends to waive these conditions to the consummation of the mergers. In the event that Simmons or Reliance waives the condition to receive such tax opinion and the tax consequences of the merger materially change, then Reliance will recirculate appropriate soliciting materials and seek new approval of the merger from Reliance shareholders.
If the merger qualifies as a reorganization within the meaning of Section 368(a) of the Code, for U.S. federal income tax purposes:
| · | A shareholder of Reliance that either (x) exchanges its Reliance common stock for the per share stock consideration and the per share cash consideration (other than cash received in lieu of fractional shares of Simmons common stock) or (y) elects to exchange its Reliance series C preferred stock for the per share merger consideration generally will (1) not recognize any loss upon surrendering its Reliance common stock or Reliance series C preferred stock and (2) recognize gain upon surrendering its Reliance common stock or Reliance series C preferred stock equal to the excess, if any, of (a) the sum of the amount of per share cash consideration received plus the fair market value (determined as of the effective time) of the per share stock consideration over (b) the holder’s aggregate adjusted tax basis in the shares of Reliance common stock or Reliance series C preferred stock surrendered, but only to the extent of the amount of per share cash consideration received. Reliance shareholders receiving cash in lieu of fractional shares of Simmons common stock will generally recognize gain or loss equal to the difference between the amount of cash received instead of a fractional share and the basis in its fractional share of Simmons common stock. | |
| · | A holder of Reliance preferred stock that exchanges its Reliance preferred stock for Simmons preferred stock generally will not recognize gain or loss. A holder of Reliance series C preferred stock that elects to receive the series C liquidation preference will recognize gain or loss equal to the difference between the amount of cash received and the basis in the Reliance series C preferred stock exchanged therefor. |
The U.S. federal income tax consequences described above may not apply to all shareholders of Reliance. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your independent tax advisor for a full understanding of the particular tax consequences of the merger to you.
| 19 |
Comparison of Shareholders’ Rights (page 100)
Upon completion of the merger, the rights of former Reliance shareholders will be governed by the amended and restated articles of incorporation of Simmons, as amended, which we refer to as the Simmons charter and the amended bylaws of Simmons, which we refer to as the Simmons bylaws. Simmons is organized under Arkansas law, while Reliance is organized under Missouri law. The rights associated with Reliance common stock are different from the rights associated with Simmons common stock. Please see the section entitled “Comparison of Shareholders’ Rights” for a discussion of the different rights associated with Simmons common stock.
Comparison of Shareholders’ Rights of Simmons and Reliance Series C Preferred Stock (page 109)
Upon completion of the merger, the rights of former holders of Reliance series C preferred stock, to the extent such holder of Reliance series C preferred stock receives Simmons series C preferred stock upon completion of the merger, will be governed by the Simmons charter and the Simmons bylaws. The terms of the Simmons series C preferred stock will be substantially similar to the terms of the Reliance series C preferred stock, but will be governed by the Simmons charter, the Simmons bylaws, and Arkansas law. Please see the section entitled “Comparison of Shareholders’ Rights of Simmons and Reliance Series C Preferred Stock” for a discussion of the different rights associated with Simmons series C preferred stock, and “Description of New Simmons Series C Preferred Stock” for a description of the rights associated with Simmons series C preferred stock.
Risk Factors (page 28)
Before voting at the Reliance special meeting, you should carefully consider all of the information contained in or incorporated by reference into this proxy statement/prospectus, including the risk factors set forth in the section entitled “Risk Factors” and described in Simmons’ Annual Report on Form 10-K for the year ended on December 31, 2017, Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, and other reports filed by Simmons with the SEC, which are incorporated by reference into this proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information.”
| 20 |
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SIMMONS
The following table sets forth highlights from Simmons’ consolidated financial data as of and for the nine months ended September 30, 2018 and 2017 and as of and for each of the five years ended December 31, 2017. Results from past periods are not necessarily indicative of results that may be expected for any future period. The results of operations for the nine months ended September 30, 2018 and 2017 are not necessarily indicative of the results of operations for the full year or any other interim period. Simmons’ management prepared the unaudited information on the same basis as it prepared Simmons’ audited consolidated financial statements. In the opinion of Simmons’ management, this information reflects all adjustments necessary for a fair presentation of this data for those dates. You should read this information in conjunction with Simmons’ consolidated financial statements and related notes included in Simmons’ Annual Report on Form 10-K for the year ended December 31, 2017 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, each of which is incorporated by reference in this proxy statement/prospectus and from which this information is derived. See “Where You Can Find More Information.”
| (Dollars and shares in thousands, | As
of or for the Nine Months Ended September 30, | Years Ended December 31, | ||||||||||||||||||||||||||
| except per share data) | 2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||
| Income statement data: | ||||||||||||||||||||||||||||
| Net interest income | $ | 414,771 | $ | 228,011 | $ | 354,930 | $ | 279,206 | $ | 278,595 | $ | 171,064 | $ | 130,850 | ||||||||||||||
| Provision for loan losses | 28,528 | 16,792 | 26,393 | 20,065 | 9,022 | 7,245 | 4,118 | |||||||||||||||||||||
| Net interest income after provision for loan losses | 386,243 | 211,219 | 328,537 | 259,141 | 269,573 | 163,819 | 126,732 | |||||||||||||||||||||
| Non-interest income | 109,308 | 102,136 | 138,765 | 139,382 | 94,661 | 62,192 | 40,616 | |||||||||||||||||||||
| Non-interest expense | 296,833 | 203,889 | 312,379 | 255,085 | 256,970 | 175,721 | 134,812 | |||||||||||||||||||||
| Income before taxes | 198,718 | 109,466 | 154,923 | 143,438 | 107,264 | 50,290 | 32,536 | |||||||||||||||||||||
| Provision for income taxes | 38,651 | 35,429 | 61,983 | 46,624 | 32,900 | 14,602 | 9,305 | |||||||||||||||||||||
| Net income | 160,067 | 74,037 | 92,940 | 96,814 | 74,364 | 35,688 | 23,231 | |||||||||||||||||||||
| Preferred stock dividends | — | — | — | 24 | 257 | — | — | |||||||||||||||||||||
| Net income available to common shareholders | $ | 160,067 | $ | 74,037 | $ | 92,940 | $ | 96,790 | $ | 74,107 | $ | 35,688 | $ | 23,231 | ||||||||||||||
| Per share data:(9) | ||||||||||||||||||||||||||||
| Basic earnings | $ | 1.74 | $ | 1.16 | $ | 1.34 | $ | 1.58 | $ | 1.32 | $ | 1.06 | $ | 0.71 | ||||||||||||||
| Diluted earnings | 1.72 | 1.16 | 1.33 | 1.56 | 1.31 | 1.05 | 0.71 | |||||||||||||||||||||
| Diluted core earnings (non- GAAP)(1) | 1.76 | 1.20 | 1.70 | 1.64 | 1.59 | 1.14 | 0.84 | |||||||||||||||||||||
| Book value | 23.66 | 19.51 | 22.65 | 18.40 | 17.27 | 13.69 | 12.44 | |||||||||||||||||||||
| Tangible book value (non- GAAP)(2) | 13.48 | 12.82 | 12.34 | 11.98 | 10.98 | 10.07 | 9.56 | |||||||||||||||||||||
| Dividends | 0.45 | 0.38 | 0.50 | 0.48 | 0.46 | 0.44 | 0.42 | |||||||||||||||||||||
| Basic average common shares outstanding | 92,245,680 | 63,593,852 | 69,384,500 | 61,291,296 | 56,167,592 | 33,757,532 | 32,678,670 | |||||||||||||||||||||
| Diluted average common shares outstanding | 92,796,860 | 64,014,270 | 69,852,920 | 61,927,092 | 56,419,322 | 33,844,052 | 32,704,334 | |||||||||||||||||||||
| Balance sheet data at period end: | ||||||||||||||||||||||||||||
| Assets | $ | 16,281,264 | $ | 9,535,370 | $ | 15,055,806 | $ | 8,400,056 | $ | 7,559,658 | $ | 4,643,354 | $ | 4,383,100 | ||||||||||||||
| Investment securities | 2,321,120 | 1,723,453 | 1,957,575 | 1,619,450 | 1,526,780 | 1,082,870 | 957,965 | |||||||||||||||||||||
| Total loans | 11,858,195 | 6,303,351 | 10,779,685 | 5,632,890 | 4,919,355 | 2,736,634 | 2,404,935 | |||||||||||||||||||||
| Allowance for loan losses (excluding acquired loans)(3) | 55,358 | 42,717 | 41,668 | 36,286 | 31,351 | 29,028 | 27,442 | |||||||||||||||||||||
| Goodwill and other intangible assets | 939,662 | 431,232 | 948,722 | 401,464 | 380,923 | 130,621 | 93,501 | |||||||||||||||||||||
| Non-interest bearing deposits | 2,778,670 | 1,669,860 | 2,665,249 | 1,491,676 | 1,280,234 | 889,260 | 718,438 | |||||||||||||||||||||
| Deposits | 12,088,506 | 7,325,590 | 11,092,875 | 6,735,219 | 6,086,096 | 3,860,718 | 3,697,567 | |||||||||||||||||||||
| Other borrowings | 1,420,917 | 522,541 | 1,380,024 | 273,159 | 162,289 | 114,682 | 117,090 | |||||||||||||||||||||
| Subordinated debt and trust preferred | 372,934 | 67,418 | 140,565 | 60,397 | 60,570 | 20,620 | 20,620 | |||||||||||||||||||||
| Shareholders’ equity | 2,183,319 | 1,257,199 | 2,084,564 | 1,151,111 | 1,076,855 | 494,319 | 403,832 | |||||||||||||||||||||
| Tangible shareholders’ equity (non-GAAP)(2) | 1,243,657 | 825,967 | 1,135,842 | 749,647 | 665,080 | 363,698 | 310,331 | |||||||||||||||||||||
| 21 |
| (Dollars and shares in thousands, | As of or for the Nine Months Ended September 30, | Years Ended December 31, | ||||||||||||||||||||||||||
| except per share data) | 2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||
| Capital ratios at period end: | ||||||||||||||||||||||||||||
| Common shareholders’ equity to total assets | 13.41 | % | 13.18 | % | 13.85 | % | 13.70 | % | 13.84 | % | 10.65 | % | 9.21 | % | ||||||||||||||
| Tangible common equity to tangible assets (non-GAAP)(4) | 8.11 | 9.07 | 8.05 | 9.37 | 9.26 | 8.06 | 7.23 | |||||||||||||||||||||
| Tier 1 leverage ratio | 8.67 | 10.62 | 9.21 | 10.95 | 11.20 | 8.77 | 9.22 | |||||||||||||||||||||
| Common equity Tier 1 risk- based ratio | 9.82 | 11.97 | 9.80 | 13.45 | 14.21 | n/a | n/a | |||||||||||||||||||||
| Tier 1 risk-based ratio | 9.82 | 12.90 | 9.80 | 14.45 | 16.02 | 13.43 | 13.02 | |||||||||||||||||||||
| Total risk-based capital ratio | 13.08 | 13.54 | 11.35 | 15.12 | 16.72 | 14.50 | 14.10 | |||||||||||||||||||||
| Dividend payout to common shareholders | 26.16 | 32.76 | 37.59 | 30.67 | 34.98 | 41.71 | 59.15 | |||||||||||||||||||||
| Annualized performance ratios: | ||||||||||||||||||||||||||||
| Return on average assets | 1.37 | % | 1.12 | % | 0.92 | % | 1.25 | % | 1.03 | % | 0.80 | % | 0.64 | % | ||||||||||||||
| Return on average common equity | 10.01 | 8.18 | 6.68 | 8.75 | 7.90 | 8.11 | 5.33 | |||||||||||||||||||||
| Return on average tangible equity (non-GAAP)(2)(5) | 18.61 | 12.97 | 11.26 | 13.92 | 12.53 | 10.99 | 6.36 | |||||||||||||||||||||
| Net interest margin(6) | 4.04 | 3.99 | 4.07 | 4.19 | 4.55 | 4.47 | 4.21 | |||||||||||||||||||||
| Efficiency ratio (non- GAAP)(7) | 53.14 | 57.25 | 55.27 | 56.32 | 59.01 | 67.22 | 71.20 | |||||||||||||||||||||
| Balance sheet ratios:(8) | ||||||||||||||||||||||||||||
| Nonperforming assets as a percentage of period-end assets | 0.39 | % | 0.91 | % | 0.52 | % | 0.79 | % | 0.85 | % | 1.25 | % | 1.69 | % | ||||||||||||||
| Nonperforming loans as a percentage of period-end loans | 0.50 | 1.05 | 0.81 | 0.91 | 0.58 | 0.63 | 0.53 | |||||||||||||||||||||
| Nonperforming assets as a percentage of period-end loans and OREO | 0.79 | 1.66 | 1.38 | 1.53 | 1.94 | 2.76 | 4.10 | |||||||||||||||||||||
| Allowance to nonperforming loans | 135.73 | 78.13 | 90.26 | 92.09 | 165.83 | 223.31 | 297.89 | |||||||||||||||||||||
| Allowance for loan losses as a percentage of period-end loans | 0.68 | 0.82 | 0.73 | 0.84 | 0.97 | 1.41 | 1.57 | |||||||||||||||||||||
| Net charge-offs (recoveries) as a percentage of average loans | 0.26 | 0.25 | 0.35 | 0.40 | 0.17 | 0.30 | 0.27 | |||||||||||||||||||||
| (1) | Diluted core earnings per share is not calculated in accordance with United States generally accepted accounting principles, or GAAP. Diluted core earnings per share excludes from net income certain non-core items and then is divided by average diluted common shares outstanding. See “Reconciliation of Simmons Non-GAAP Financial Measures” below for a GAAP reconciliation of this non-GAAP financial measure. |
| (2) | Because of Simmons’ significant level of intangible assets, total goodwill and core deposit premiums, management of Simmons believes a useful calculation for investors in their analysis of Simmons is tangible book value per share, which is a non-GAAP financial measure. Tangible book value per share is calculated by subtracting goodwill and intangible assets from total common shareholders’ equity, and dividing the resulting number by the common stock outstanding at period end. See “Reconciliation of Simmons Non-GAAP Financial Measures” below for a GAAP reconciliation of this non-GAAP financial measure. |
| (3) | Allowance for loan losses at September 30, 2018 includes $1,345,000 allowance for loans acquired (not shown in the table above). The total allowance for loan losses at September 30, 2018 was $56,703,000. Allowance for loan losses at September 30, 2017 includes $391,000 of allowance for loans acquired (not shown in the table above). The total allowance for loan losses at September 30, 2017 was $43,108,000. Allowance for loan losses includes $418,000 at December 31, 2017 and $954,000 at December 31, 2016 and 2015 for loans acquired (not shown in the table above). The total allowance for loan losses at December 31, 2017, 2016 and 2015 was $42,086,000, $37,240,000 and $32,305,000, respectively. |
| (4) | Tangible common equity to tangible assets ratio is a non-GAAP financial measure. The tangible common equity to tangible assets ratio is calculated by dividing total common shareholders’ equity less goodwill and other intangible assets (resulting in tangible common equity) by total assets less goodwill and other intangible assets as of and for the periods ended presented above. See “Reconciliation of Simmons Non-GAAP Financial Measures” below for a GAAP reconciliation of this non-GAAP financial measure. |
| 22 |
| (5) | Return on average tangible equity is a non-GAAP financial measure that removes the effect of goodwill and intangible assets, as well as the amortization of intangibles, from the return on average equity. This non-GAAP financial measure is calculated as net income, adjusted for the tax-effected effect of intangibles, divided by average tangible equity which is calculated as average shareholders’ equity for the period presented less goodwill and other intangible assets. See “Reconciliation of Simmons Non-GAAP Financial Measures” below for a GAAP reconciliation of this non-GAAP financial measure. |
| (6) | Fully taxable equivalent (assuming an income tax rate of 26.135% for periods beginning January 1, 2018 or 39.225% for periods prior to 2018). |
| (7) | The efficiency ratio is a non-GAAP financial measure. The efficiency ratio is noninterest expense before foreclosed property expense and amortization of intangibles as a percent of net interest income (fully taxable equivalent) and noninterest revenues, excluding gains and losses from securities transactions and non-core items. See “Reconciliation of Simmons Non-GAAP Financial Measures” below for a GAAP reconciliation of this non-GAAP financial measure. |
| (8) | Excludes all loans acquired and excludes foreclosed assets acquired, covered by FDIC loss share agreements, except for their inclusion in total assets. |
| (9) | Share and per share amounts have been restated for the two-for-one stock split in February 2018. |
Reconciliation of Simmons Non-GAAP Financial Measures
| (Dollars and shares in thousands, | As
of or for the Nine Months Ended September 30, | Years Ended December 31, | ||||||||||||||||||||||||||
| except per share data) | 2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||
| Reconciliation of core earnings: | ||||||||||||||||||||||||||||
| Net income | $ | 160,067 | $ | 74,037 | $ | 92,940 | $ | 96,790 | $ | 74,107 | $ | 35,688 | $ | 23,231 | ||||||||||||||
| Non-core items: | ||||||||||||||||||||||||||||
| Accelerated vesting on retirement agreements | — | — | — | — | 2,209 | — | — | |||||||||||||||||||||
| Gain on sale of merchant services | — | — | — | — | — | (1,000 | ) | — | ||||||||||||||||||||
| Gain on sale of banking operations | — | — | — | — | (2,110 | ) | — | — | ||||||||||||||||||||
| Gain from early retirement of trust preferred securities | — | — | — | — | — | — | — | |||||||||||||||||||||
| Gain on sale of insurance lines of business | — | (3,708 | ) | (3,708 | ) | — | — | — | — | |||||||||||||||||||
| Loss on FDIC loss-share termination | — | — | — | — | 7,476 | — | — | |||||||||||||||||||||
| Donation to Simmons Foundation | — | — | 5,000 | — | — | — | — | |||||||||||||||||||||
| Merger-related costs | 3,980 | 7,879 | 21,923 | 4,835 | 13,760 | 7,470 | 6,376 | |||||||||||||||||||||
| Change-in-control payments | — | — | — | — | — | 885 | — | |||||||||||||||||||||
| Loss from sale of securities | — | — | — | — | — | — | 193 | |||||||||||||||||||||
| Branch right-sizing | 1,049 | 53 | 169 | 3,359 | 3,144 | (3059 | ) | 641 | ||||||||||||||||||||
| Charter consolidation costs | — | — | — | — | — | 652 | — | |||||||||||||||||||||
| Tax effect(1) | (1,314 | ) | (1,230 | ) | (8,746 | ) | (2,981 | ) | (8,964 | ) | (1,929 | ) | (2,829 | ) | ||||||||||||||
| Net non-core items (before SAB 118 adjustment) | 3,715 | 2,994 | 14,638 | 4,619 | 15,515 | 3,019 | 4,381 | |||||||||||||||||||||
| SAB 118 adjustment(2) | — | — | 11,471 | — | — | — | — | |||||||||||||||||||||
| Diluted core earnings | $ | 163,782 | $ | 77,031 | $ | 119,049 | $ | 101,409 | $ | 89,622 | $ | 38,707 | $ | 27,612 | ||||||||||||||
| Diluted earnings per share | $ | 1.72 | $ | 1.16 | $ | 1.33 | $ | 1.56 | $ | 1.31 | $ | 1.05 | $ | 0.71 | ||||||||||||||
| Non-core items: | ||||||||||||||||||||||||||||
| Accelerated vesting on retirement agreements | — | — | — | — | 0.04 | — | — | |||||||||||||||||||||
| Gain on sale of merchant services | — | — | — | — | — | (0.03 | ) | — | ||||||||||||||||||||
| Gain on sale of banking operations | — | — | — | — | (0.04 | ) | — | — | ||||||||||||||||||||
| Gain from early retirement of trust preferred securities | — | — | — | (0.01 | ) | — | — | — | ||||||||||||||||||||
| Gain on sale of insurance lines of business | — | (0.06 | ) | (0.04 | ) | — | — | — | — | |||||||||||||||||||
| Loss on FDIC loss-share termination | — | — | — | — | 0.14 | — | — | |||||||||||||||||||||
| Donation to Simmons Foundation | — | — | 0.07 | — | — | — | — | |||||||||||||||||||||
| Merger-related costs | 0.04 | 0.12 | 0.31 | 0.08 | 0.25 | 0.22 | 0.19 | |||||||||||||||||||||
| Change-in-control payments | — | — | — | — | — | 0.03 | — | |||||||||||||||||||||
| Loss on sale of securities | — | — | — | — | — | — | 0.01 | |||||||||||||||||||||
| Branch right-sizing | 0.01 | — | — | 0.06 | 0.06 | (0.08 | ) | 0.02 | ||||||||||||||||||||
| Charter consolidation costs | — | — | — | — | — | 0.02 | — | |||||||||||||||||||||
| Tax effect(1) | (0.01 | ) | (0.02 | ) | (0.13 | ) | (0.05 | ) | (0.17 | ) | (0.07 | ) | (0.09 | ) | ||||||||||||||
| Net non-core items (before SAB 118 adjustment) | 0.04 | 0.04 | 0.21 | 0.08 | 0.28 | 0.09 | 0.13 | |||||||||||||||||||||
| SAB 118 adjustment(2) | — | — | 0.16 | — | — | — | — | |||||||||||||||||||||
| Diluted core earnings | $ | 1.76 | $ | 1.20 | $ | 1.70 | $ | 1.64 | $ | 1.59 | $ | 1.14 | $ | 0.84 | ||||||||||||||
| (1) | Effective tax rate of 26.135% for 2018 and 39.225% for prior years, adjusted for non-deductible merger-related costs and deferred tax items on the sale of the insurance lines of business. |
| (2) | Tax adjustment to revalue deferred tax assets and liabilities to account for the future impact of lower corporate tax rates resulting from the tax reform legislation signed into law on December 22, 2017. |
| 23 |
| (Dollars and shares in thousands, | As
of or for the Nine Months Ended September 30, | Years Ended December 31, | ||||||||||||||||||||||||||
| except per share data) | 2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||
| Calculation of tangible book value: | ||||||||||||||||||||||||||||
| Total common shareholders’ equity | $ | 2,183,319 | $ | 1,257,199 | $ | 2,084,564 | $ | 1,151,111 | $ | 1,046,003 | $ | 494,319 | $ | 403,832 | ||||||||||||||
| Intangible assets: | ||||||||||||||||||||||||||||
| Goodwill | (845,687 | ) | (375,731 | ) | (842,651 | ) | (348,505 | ) | (327,686 | ) | (108,095 | ) | (78,529 | ) | ||||||||||||||
| Other intangible assets | (93,975 | ) | (55,501 | ) | (106,071 | ) | (52,959 | ) | (53,237 | ) | (22,526 | ) | (14,972 | ) | ||||||||||||||
| Total intangibles | (939,662 | ) | (431,232 | ) | (948,722 | ) | (401,464 | ) | (380,923 | ) | (130,621 | ) | (93,501 | ) | ||||||||||||||
| Tangible shareholders’equity | $ | 1,243,657 | $ | 825,967 | $ | 1,135,842 | $ | 749,647 | $ | 665,080 | $ | 363,698 | $ | 310,331 | ||||||||||||||
| Shares of common stock outstanding | 92,291,070 | 64,424,484 | 92,029,118 | 62,555,446 | 60,556,864 | 36,104,976 | 32,452,512 | |||||||||||||||||||||
| Book value per common share | $ | 23.66 | $ | 19.51 | $ | 22.65 | $ | 18.40 | $ | 17.27 | $ | 13.69 | $ | 12.44 | ||||||||||||||
| Tangible book value per common share | $ | 13.48 | $ | 12.82 | $ | 12.34 | $ | 11.98 | $ | 10.98 | $ | 10.07 | $ | 9.56 | ||||||||||||||
| Calculation of Tangible | ||||||||||||||||||||||||||||
| Common Equity and the | ||||||||||||||||||||||||||||
| Ratio of Tangible | ||||||||||||||||||||||||||||
| Common Equity to | ||||||||||||||||||||||||||||
| Tangible Assets | ||||||||||||||||||||||||||||
| Total shareholders’ equity | $ | 2,183,319 | $ | 1,257,199 | $ | 2,084,564 | $ | 1,151,111 | $ | 1,046,003 | $ | 494,319 | $ | 403,832 | ||||||||||||||
| Intangible assets: | ||||||||||||||||||||||||||||
| Goodwill | (845,687 | ) | (375,731 | ) | (842,651 | ) | (348,505 | ) | (327,686 | ) | (108,095 | ) | (78,529 | ) | ||||||||||||||
| Other intangible assets | (93,975 | ) | (55,501 | ) | (106,071 | ) | (52,959 | ) | (53,237 | ) | (22,526 | ) | (14,972 | ) | ||||||||||||||
| Total intangibles | (939,662 | ) | (431,232 | ) | (948,722 | ) | (401,464 | ) | (380,923 | ) | (130,621 | ) | (93,501 | ) | ||||||||||||||
| Tangible shareholders’ equity | $ | 1,243,657 | $ | 825,967 | $ | 1,135,842 | $ | 749,647 | $ | 665,080 | $ | 363,698 | $ | 310,331 | ||||||||||||||
| Total assets | $ | 16,281,264 | $ | 9,535,370 | $ | 15,055,806 | $ | 8,400,056 | $ | 7,559,658 | $ | 4,643,354 | $ | 4,383,100 | ||||||||||||||
| Intangible assets: | ||||||||||||||||||||||||||||
| Goodwill | (845,687 | ) | (375,731 | ) | (842,651 | ) | (348,505 | ) | (327,686 | ) | (108,095 | ) | (78,529 | ) | ||||||||||||||
| Other intangible assets | (93,975 | ) | (55,501 | ) | (106,071 | ) | (52,959 | ) | (53,237 | ) | (22,526 | ) | (14,972 | ) | ||||||||||||||
| Total intangibles | (939,662 | ) | (431,232 | ) | (948,722 | ) | (401,464 | ) | (380,923 | ) | (130,621 | ) | (93,501 | ) | ||||||||||||||
| Tangible assets | $ | 15,341,602 | $ | 9,104,138 | $ | 14,107,084 | $ | 7,998,592 | $ | 7,178,735 | $ | 4,512,733 | $ | 4,289,599 | ||||||||||||||
| Ratio of common equity to assets | 13.41 | % | 13.18 | % | 13.85 | % | 13.70 | % | 13.84 | % | 10.65 | % | 9.21 | % | ||||||||||||||
| Ratio of tangible common equity to tangible assets | 8.11 | % | 9.07 | % | 8.05 | % | 9.37 | % | 9.26 | % | 8.06 | % | 7.24 | % | ||||||||||||||
| Calculation of Return on Tangible Common Equity | ||||||||||||||||||||||||||||
| Net income available to common shareholders | $ | 160,067 | $ | 74,037 | $ | 92,940 | $ | 96,790 | $ | 74,107 | $ | 35,688 | $ | 23,231 | ||||||||||||||
| Amortization of intangibles, net of taxes | 6,180 | 2,934 | 4,659 | 3,611 | 2,972 | 1,203 | 365 | |||||||||||||||||||||
| Total income available to common shareholders | $ | 166,247 | $ | 76,971 | $ | 97,599 | $ | 100,401 | $ | 77,079 | $ | 36,891 | $ | 23,596 | ||||||||||||||
| Average shareholders’ equity | $ | 2,138,818 | $ | 1,210,487 | $ | 1,390,815 | $ | 1,105,775 | $ | 938,521 | $ | 440,168 | $ | 435,918 | ||||||||||||||
| Average intangible assets: | ||||||||||||||||||||||||||||
| Goodwill | (845,180 | ) | (363,383 | ) | (455,453 | ) | (332,974 | ) | (281,133 | ) | (88,965 | ) | (60,655 | ) | ||||||||||||||
| Other intangibles | (99,448 | ) | (53,941 | ) | (68,896 | ) | (51,710 | ) | (42,104 | ) | (15,533 | ) | (4,054 | ) | ||||||||||||||
| Total average intangibles | (944,628 | ) | (417,324 | ) | (524,349 | ) | (384,684 | ) | (323,237 | ) | (104,498 | ) | (64,709 | ) | ||||||||||||||
| Average tangible shareholders’ equity | $ | 1,194,190 | $ | 793,163 | $ | 866,466 | $ | 721,091 | $ | 615,284 | $ | 335,670 | $ | 371,209 | ||||||||||||||
| Return on average common equity | 10.01 | % | 8.18 | % | 6.68 | % | 8.75 | % | 7.90 | % | 8.11 | % | 5.33 | % | ||||||||||||||
| Return on average tangible common equity | 18.61 | % | 12.97 | % | 11.26 | % | 13.92 | % | 12.53 | % | 10.99 | % | 6.36 | % | ||||||||||||||
| 24 |
| (Dollars and shares in thousands, | As of or for the Nine Months Ended September 30, | Years Ended December 31, | ||||||||||||||||||||||||||
| except per share data) | 2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||
| Calculation of Efficiency Ratio | ||||||||||||||||||||||||||||
| Non-interest expense | $ | 296,833 | $ | 203,889 | $ | 312,379 | $ | 255,085 | $ | 256,970 | $ | 175,721 | $ | 134,812 | ||||||||||||||
| Non-core non-interest expense adjustment | (5,029 | ) | (8,197 | ) | (27,357 | ) | (8,435 | ) | (18,747 | ) | (13,747 | ) | (7,017 | ) | ||||||||||||||
| Other real estate and foreclosure expense adjustment | (2,940 | ) | (2,177 | ) | (3,042 | ) | (4,389 | ) | (4,861 | ) | (4,507 | ) | (1,337 | ) | ||||||||||||||
| Amortization of intangibles adjustment | (8,367 | ) | (4,827 | ) | (7,666 | ) | (5,942 | ) | (4,889 | ) | (1,979 | ) | (601 | ) | ||||||||||||||
| Efficiency ratio numerator | $ | 280,497 | $ | 188,688 | $ | 274,314 | $ | 236,319 | $ | 228,473 | $ | 155,488 | $ | 125,857 | ||||||||||||||
| Net-interest income | $ | 414,771 | $ | 228,011 | $ | 354,930 | $ | 279,206 | $ | 278,595 | $ | 171,064 | $ | 130,850 | ||||||||||||||
| Non-interest income | 109,308 | 102,136 | 138,765 | 139,382 | 94,661 | 62,192 | 40,616 | |||||||||||||||||||||
| Non-core non-interest income adjustment | — | (3,972 | ) | (3,972 | ) | (835 | ) | 5,731 | (8,780 | ) | 193 | |||||||||||||||||
| Fully tax-equivalent adjustment | 3,831 | 5,798 | 7,723 | 7,722 | 8,517 | 6,840 | 4,951 | |||||||||||||||||||||
| (Gain) loss on sale of securities | (53 | ) | (2,302 | ) | (1,059 | ) | (5,848 | ) | (307 | ) | (8 | ) | 151 | |||||||||||||||
| Efficiency ratio denominator | $ | 527,857 | $ | 329,671 | $ | 496,387 | $ | 419,627 | $ | 387,197 | $ | 231,308 | $ | 176,761 | ||||||||||||||
| Efficiency ratio | 53.14 | % | 57.25 | % | 55.27 | % | 56.32 | % | 59.01 | % | 67.22 | % | 71.20 | % | ||||||||||||||
| 25 |
Simmons common stock trades on Nasdaq under the symbol “SFNC” and Reliance common stock trades on the OTC Pink Market under the symbol “RLBS.” The table below sets forth, for the calendar quarters indicated, the high and low sales price per share of shares of Reliance common stock. There is no established public trading market for Reliance common stock. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions. As of [ ], 2019 there were approximately [ ] registered Simmons shareholders and approximately [ ] registered Reliance shareholders.
| Reliance Common Stock | ||||||||
| High | Low | |||||||
| 2017 | ||||||||
| First quarter | $ | 1.60 | $ | 1.48 | ||||
| Second quarter | $ | 1.90 | $ | 1.57 | ||||
| Third quarter | $ | 2.75 | $ | 1.80 | ||||
| Fourth quarter | $ | 2.36 | $ | 2.01 | ||||
| 2018 | ||||||||
| First quarter | $ | 2.16 | $ | 1.60 | ||||
| Second quarter | $ | 2.00 | $ | 1.60 | ||||
| Third quarter | $ | 1.80 | $ | 1.37 | ||||
| Fourth quarter | $ | 2.10 | $ | 1.40 | ||||
| 2019 | ||||||||
| First quarter (through [ ], 2019) | $ | [ ] | $ | [ ] | ||||
Although Reliance pays dividends in full on Reliance preferred stock, it has not historically paid dividends on Reliance common stock and does not intend to commence paying dividends on Reliance common stock.
| 26 |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained or incorporated by reference in this proxy statement/prospectus may not be based on historical facts and are “forward-looking statements” within the meaning of Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by reference to a future period(s) or by the use of forward-looking terminology, such as “believe,” “budget,” “expect,” “foresee,” “anticipate,” “intend,” “indicate,” “target,” “estimate,” “plan,” “project,” “continue,” “contemplate,” “positions,” “prospects,” “predict,” or “potential,” by future conditional verbs such as “will,” “would,” “should,” “could,” “might” or “may,” or by variations of such words or by similar expressions. These forward-looking statements include, without limitation, statements relating to the benefits of the merger, the impact Simmons and Reliance expect the mergers to have on the combined entity’s operations, financial condition, and financial results, and Simmons’ expectations about its ability to successfully integrate the combined businesses and the amount of cost savings and other benefits Simmons expects to realize as a result of the mergers. The forward-looking statements also include, without limitation, statements relating to the combined entity’s future growth, revenue, assets, asset quality, profitability and customer service, critical accounting policies, net interest margin, non-interest revenue, market conditions related to Simmons’ common stock repurchase program, allowance for loan losses, the effect of certain new accounting standards on Simmons’ financial statements, income tax deductions, credit quality, the level of credit losses from lending commitments, net interest revenue, interest rate sensitivity, loan loss experience, liquidity, capital resources, market risk, earnings, effect of pending litigation, acquisition strategy, legal and regulatory limitations and compliance and competition. These forward-looking statements are based on various assumptions (some of which may be beyond our control) and involve substantial risks and uncertainties. There are many factors that may cause actual results to differ materially from those contemplated by such forward-looking statements. In addition to the factors disclosed by us under the caption “Risk Factors” and elsewhere in this document, and to factors previously disclosed by Simmons’ reports filed with the SEC and incorporated by reference herein, the following factors, among others, could cause actual results to differ materially and adversely from our forward-looking statements:
| · | the businesses of Simmons and Reliance may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; |
| · | expected revenue synergies and cost savings from the mergers may not be fully realized or realized within the expected time frame; |
| · | revenues following the mergers may be lower than expected; |
| · | customer and employee relationships and business operations may be disrupted by the mergers; |
| · | management’s time and attention may be diverted to merger-related issues; |
| · | the potential dilutive effect of shares of Simmons common stock to be issued in the merger; |
| · | Simmons’ and Reliance’s ability to obtain regulatory, shareholder or other approvals or other conditions to closing on a timely basis or at all, the ability to close the mergers on the expected timeframe, or at all; |
| · | closing may be more difficult, time-consuming or costly than expected; |
| · | Simmons’ and Reliance’s customers, employees, vendors and counterparties may have varied or negative reactions to the mergers; |
| · | changes in general business, economic and market conditions; |
| · | changes in fiscal and monetary policies, and laws and regulations; |
| · | changes in interest rates, inflation rates, deposit flows, loan demand and real estate values; |
| · | a deterioration in credit quality and/or a reduced demand for, or supply of, credit; |
| · | volatility in the securities markets generally or in the market price of Simmons common stock specifically; and |
| · | other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. |
For any forward-looking statements made in this proxy statement/prospectus or in any documents incorporated by reference into this proxy statement/prospectus, Simmons and Reliance claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this proxy statement/prospectus or the date of the applicable document incorporated by reference in this proxy statement/prospectus. Simmons and Reliance do not undertake to update forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made. All subsequent written and oral forward-looking statements concerning the mergers or other matters addressed in this proxy statement/prospectus and attributable to Simmons, Reliance or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this proxy statement/prospectus.
| 27 |
In addition to general investment risks and the other information contained in or incorporated by reference into this proxy statement/prospectus, including the matters addressed under the section entitled “Cautionary Statement Regarding Forward-Looking Statements,” and the matters discussed under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of Simmons’ Annual Report on Form 10-K for the year ended December 31, 2017 and any updates to those risk factors set forth in Simmons’ Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings, which have been filed with the SEC, Reliance shareholders should carefully consider the following factors in deciding whether to vote for the proposals presented in this proxy statement/prospectus. Please also see the section entitled “Where You Can Find More Information.”
Because the market price of Simmons common stock will fluctuate, the value of the per share stock consideration to be received by Reliance shareholders may change.
Upon completion of the merger, each share of outstanding Reliance common stock will be converted into the right to receive the per share merger consideration (except for shares of Reliance common stock held directly or indirectly by Reliance or Simmons and any dissenting shares), with cash paid in lieu of any remaining fractional shares. Any change in the market price of Simmons common stock prior to the completion of the merger will affect the market value of the per share stock consideration that Reliance shareholders will receive upon completion of the merger. At the time of the Reliance special meeting, Reliance shareholders will not know or be able to calculate the value of the Simmons common stock they will receive upon completion of the merger. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in our respective businesses, operations and prospects, and regulatory considerations, among other things. Many of these factors are beyond the control of Simmons and Reliance. Reliance shareholders should obtain current market quotations for shares of Simmons common stock and Reliance common stock before voting their shares at the Reliance special meeting.
Other than as described in this proxy statement/prospectus, there will be no adjustment to the merger consideration based upon changes in the market price of Simmons common stock or Reliance common stock prior to the effective time. Upon the terms and subject to the conditions of the merger agreement, if the Simmons average closing price is more than $37.68 and the difference between the percentage change in Simmons average closing price and the percentage change in the Nasdaq Bank Index exceeds 20% over a designated measurement period, then the cash consideration will be decreased by an amount in cash such that the total value of the merger consideration is not greater than $213,420,000. In addition, the merger agreement cannot be terminated due to a change in the price of Simmons common stock or Reliance common stock, except if the Simmons average closing price is less than $25.12 and the difference between the percentage change in the Nasdaq Bank Index and the percentage change in the Simmons average closing price exceeds 20% over a designated measurement period, unless Simmons agrees to increase the cash consideration by an amount in cash such that the total value of the merger consideration is not less than $163,180,000.
See the sections entitled “The Merger Agreement—Pricing Adjustments” and “The Merger Agreement—Termination of the Merger Agreement.”
| 28 |
Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.
Before the transactions contemplated by the merger agreement, including the mergers, may be completed, various approvals must be obtained from bank regulatory authorities. In determining whether to grant these approvals, the applicable regulatory authorities consider a variety of factors, including the competitive impact of the proposal in the relevant geographic markets; financial, managerial and other supervisory considerations, including the future prospects, of each party; potential effects of the mergers on the convenience and needs of the communities to be served and the record of the insured depository institution subsidiaries under the Community Reinvestment Act of 1977 and the regulations promulgated thereunder, or the Community Reinvestment Act, including the subsidiaries’ overall compliance records and recent fair lending examinations; effectiveness of the parties in combatting money laundering activities; the extent to which the proposal would result in greater or more concentrated risks to the stability of the United States banking or financial system; and whether Simmons controls or would after consummation of the mergers control deposits in excess of certain limits. These regulatory authorities may impose conditions on the granting of such approvals. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying completion of the mergers or of imposing additional costs or limitations on the combined company following the mergers. The regulatory approvals may not be received at all, may not be received in a timely fashion, or may contain conditions on the completion of the mergers that are not anticipated or cannot be met. Furthermore, such conditions or changes may constitute a burdensome condition that may allow Simmons to terminate the merger agreement and Simmons may exercise its right to terminate the merger agreement. If the consummation of the mergers are delayed, including by a delay in receipt of necessary regulatory approvals, the business, financial condition and results of operations of each party may also be materially and adversely affected. See the section entitled “The Mergers—Regulatory Approvals Required for the Mergers.”
Failure of the mergers to be completed, the termination of the merger agreement or a significant delay in the consummation of the mergers could negatively impact Simmons and Reliance.
The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the mergers. Please see the section entitled “The Merger Agreement—Conditions to Consummation of the Mergers.” These conditions to the consummation of the mergers may not be fulfilled and, accordingly, the mergers may not be completed. In addition, if the mergers are not completed by November 30, 2019, either Simmons or Reliance may choose to terminate the merger agreement at any time after that date if the failure to consummate the transactions contemplated by the merger agreement is not caused by any breach of the merger agreement by the party electing to terminate the merger agreement, before or after Reliance shareholder approval of the merger.
If the mergers are not consummated, the ongoing business, financial condition and results of operations of each party may be materially adversely affected and the market price of each party’s common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the mergers will be consummated. If the consummation of the mergers are delayed, including by the receipt of a competing acquisition proposal, the business, financial condition and results of operations of each party may be materially adversely affected.
In addition, each party has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of filing, printing and mailing this proxy statement/prospectus and all filing and other fees paid to the SEC and other regulatory agencies in connection with the mergers. If the mergers are not completed, the parties would have to recognize these expenses without realizing the expected benefits of the mergers. Any of the foregoing, or other risks arising in connection with the failure of or delay in consummating the mergers, including the diversion of management attention from pursuing other opportunities and the constraints in the merger agreement on the ability to make significant changes to each party’s ongoing business during the pendency of the mergers, could have a material adverse effect on each party’s business, financial condition and results of operations.
Additionally, Simmons’ or Reliance’s business may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the mergers, without realizing any of the anticipated benefits of completing the mergers, and the market price of Simmons common stock or Reliance common stock might decline to the extent that the current market price reflects a market assumption that the mergers will be completed. If the merger agreement is terminated and a party’s board of directors seeks another merger or business combination, such party’s shareholders cannot be certain that such party will be able to find a party willing to engage in a transaction on more attractive terms than the mergers.
| 29 |
Some of the conditions to the mergers may be waived by Simmons or Reliance without resoliciting Reliance shareholder approval of the merger agreement.
Some of the conditions to the mergers set forth in the merger agreement may be waived by Reliance or Simmons, subject to the agreement of the other party in specific cases. See the section entitled “The Merger Agreement—Conditions to Consummation of the Mergers.” If any such conditions are waived, Reliance and Simmons will evaluate whether an amendment of this proxy statement/prospectus and resolicitation of proxies is warranted. In the event that the Reliance board of directors determines that resolicitation of Reliance shareholders is not warranted, Simmons and Reliance will have the discretion to complete the mergers without seeking further Reliance shareholder approval.
Simmons and Reliance will be subject to business uncertainties and contractual restrictions while the mergers are pending.
Uncertainty about the effect of the mergers on employees, customers (including depositors and borrowers), suppliers and vendors may have an adverse effect on the business, financial condition and results of operations of each party. These uncertainties may impair Simmons’ or Reliance’s ability to attract, retain and motivate key personnel and customers (including depositors and borrowers) pending the consummation of the mergers, as such personnel and customers may experience uncertainty about their future roles and relationships following the consummation of the mergers. Additionally, these uncertainties could cause customers (including depositors and borrowers), suppliers, vendors and others who deal with Simmons and/or Reliance to seek to change existing business relationships with Simmons and/or Reliance or fail to extend an existing relationship with Simmons and/or Reliance. In addition, competitors may target each party’s existing customers by highlighting potential uncertainties and integration difficulties that may result from the mergers.
The pursuit of the mergers and the preparation for the integration may place a burden on each company’s management and internal resources. Any significant diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process could have a material adverse effect on each party’s business, financial condition and results of operations.
In addition, the merger agreement restricts each party from taking certain actions without the other party’s consent while the merger is pending. These restrictions could have a material adverse effect on each party’s business, financial condition and results of operations. Please see the section entitled “The Merger Agreement—Covenants and Agreements—Conduct of Business Prior to the Effective Time” for a description of the restrictive covenants applicable to Simmons and Reliance.
Reliance’s directors and executive officers have interests in the mergers that may be different from the interests of the Reliance shareholders.
Reliance’s directors and executive officers have interests in the mergers that may be different from, or in addition to, the interests of the Reliance shareholders generally. The Reliance board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the transactions contemplated by the merger agreement and in determining to recommend to the Reliance shareholders that they vote to approve the merger proposal. These interests are described in more detail under the section entitled “The Mergers—Interests of Reliance’s Directors and Executive Officers in the Mergers.”
The merger agreement contains provisions that may discourage other companies from pursuing, announcing or submitting a business combination proposal to Reliance that might result in greater value to Reliance shareholders.
The merger agreement contains provisions that may discourage a third party from pursuing, announcing or submitting a business combination proposal to Reliance that might result in greater value to the Reliance shareholders than the mergers. These provisions include a general prohibition on Reliance from soliciting or entering into discussions with any third party regarding any acquisition proposal or offers for competing transactions, as described under the section entitled “The Merger Agreement—Agreement Not to Solicit Other Offers.” Furthermore, if the merger agreement is terminated, under certain circumstances, Reliance may be required to pay Simmons a termination fee equal to $10,000,000, as described under the section entitled “The Merger Agreement—Termination Fee.” Reliance also has an unqualified obligation to submit its merger-related proposals to a vote by its shareholders, including if Reliance receives an unsolicited proposal that the Reliance board of directors believes is superior to the mergers. See the section entitled “The Merger Agreement—Reliance Special Meeting and Recommendation of the Reliance Board of Directors.”
| 30 |
Each of Thomas H. Brouster, Sr. and Gaines S. Dittrich, in their capacities as individuals, have separately entered into a Reliance voting agreement pursuant to which they agreed to vote their beneficially owned shares of Reliance common stock in favor of the merger proposal and certain related matters and against alternative transactions. Mr. Brouster is the holder of irrevocable proxies previously granted by certain of Reliance’s shareholders that give Mr. Brouster sole authority to vote [34,647,909] shares of Reliance common stock as of the Reliance record date, in addition to the shares of Reliance common stock owned of record by him. Pursuant to the Reliance voting agreement that Mr. Brouster entered into, these shares of Reliance common stock will be voted in favor of the merger proposal and certain related matters and against alternative transactions. As of the Reliance record date, shares constituting approximately [53.6]% of the Reliance common stock entitled to vote at the Reliance special meeting are subject to Reliance voting agreements. For further information, please see the section entitled “The Merger Agreement—Voting Agreements.”
The merger is expected to, but may not, qualify as a reorganization under Section 368(a) of the Code.
The parties expect the merger to be treated as a “reorganization” within the meaning of Section 368(a) of the Code, and the obligation of Simmons and Reliance to complete the mergers is conditioned upon the receipt of U.S. federal income tax opinion to that effect from Covington. This tax opinion represents the legal judgment of counsel rendering the opinion and is not binding on the United States Internal Revenue Service, or the IRS, or the courts. The expectation that the merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Code reflects assumptions and was prepared taking into account the relevant information available to Simmons and Reliance at the time. However, this information is not a fact and should not be relied upon as necessarily indicative of future results. Furthermore, such expectation constitutes a forward-looking statement. For information on forward-looking statements, see the section entitled “Cautionary Statement Regarding Forward-Looking Statements.” If the merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, then a Reliance shareholder or holder of Reliance preferred stock may be required to recognize any gain or loss equal to the difference between (1) the sum of the fair market value of either Simmons common stock or Simmons preferred stock received by the shareholder in the merger and the amount of cash, if any, received by the shareholder in the merger, and (2) the shareholder’s adjusted tax basis in the shares of Reliance common stock or Reliance preferred stock exchanged therefor. For further information, please refer to the section entitled “Material U.S. Federal Income Tax Consequences Relating to the Merger.” You should consult your tax advisor to determine the particular tax consequences to you.
The opinion of Sandler O’Neill delivered to the Reliance board of directors prior to the signing of the merger agreement will not reflect changes in circumstances after the dates of the opinion.
The Reliance board of directors received a fairness opinion from Sandler O’Neill dated November 13, 2018. Such opinion has not been updated as of the date of this proxy statement/prospectus and will not be updated at, or prior to, the time of the completion of the mergers. Changes in the operations and prospects of Simmons or Reliance, general market and economic conditions and other factors that may be beyond the control of Simmons and Reliance may alter the value of Simmons or Reliance or the prices of shares of Simmons common stock or Reliance common stock by the time the mergers are completed. The opinion does not speak as of the time the mergers are completed or as of any other date than the date of the opinion. The opinion that the Reliance board of directors received from Sandler O’Neill is attached as Annex C to this proxy statement/prospectus. For a description of the opinion, see “The Mergers—Opinion of Sandler O’Neill & Partners, L.P.” For a description of the other factors considered by the Reliance board of directors in determining to approve the merger, see “The Mergers—Reliance’s Reasons for the Mergers and Recommendation of the Reliance Board of Directors.”
| 31 |
Litigation against Reliance or Simmons, or the members of the Reliance or Simmons board of directors, could prevent or delay the completion of the mergers.
While Simmons and Reliance believe that any claims that may be asserted by purported shareholder plaintiffs related to the mergers would be without merit, the results of any such potential legal proceedings are difficult to predict and could delay or prevent the mergers from being competed in a timely manner. The existence of litigation related to the mergers could affect the likelihood of obtaining the required approval from Reliance shareholders. Moreover, any litigation could be time consuming and expensive, could divert Simmons and Reliance management’s attention away from their regular business and, any lawsuit adversely resolved against Reliance, Simmons or members of the Reliance or Simmons board of directors, could have a material adverse effect on each party’s business, financial condition and results of operations.
One of the conditions to the consummation of the mergers is the absence of any law or order (whether temporary, preliminary or permanent) by any court or regulatory authority of competent jurisdiction prohibiting, restricting or making illegal consummation of the consummation of the transactions contemplated by the merger agreement (including the merger). Consequently, if a settlement or other resolution is not reached in any lawsuit that is filed or any regulatory proceeding and a claimant secures injunctive or other relief or a regulatory authority issues an order or other directive prohibiting, restricting or making illegal consummation of the consummation of the transactions contemplated by the merger agreement (including the merger), then such injunctive or other relief may prevent the mergers from becoming effective in a timely manner or at all.
Risks Relating to the Combined Company’s Business Following the Mergers
The market price of the common stock of the combined company after the merger may be affected by factors different from those currently affecting the shares of Simmons or Reliance common stock.
Upon the completion of the merger, Simmons shareholders and Reliance shareholders will become shareholders of the combined company. Simmons’ business differs from that of Reliance, and, accordingly, the results of operations of the combined company and the market price of the combined company’s shares of common stock may be affected by factors different from those currently affecting the independent results of operations of each of Simmons and Reliance. For a further discussion of the businesses of Simmons and Reliance, please see the section entitled “Information About the Companies.” For a discussion of the businesses of Simmons and of certain factors to consider in connection with such business, please see the documents incorporated by reference in this proxy statement/prospectus and referred to in the section entitled “Where You Can Find More Information.”
Sales of substantial amounts of Simmons common stock in the open market by former Reliance shareholders could depress Simmons’ stock price.
Shares of Simmons common stock that are issued to Reliance shareholders in the merger will be freely tradable without restrictions or further registration under the Securities Act. Simmons currently expects to issue 4,000,000 shares of Simmons common stock in connection with the merger. If the mergers are completed and if Reliance’s former shareholders sell substantial amounts of Simmons common stock in the public market following completion of the merger, the market price of Simmons common stock may decrease. These sales might also make it more difficult for Simmons to sell equity or equity-related securities at a time and price that it otherwise would deem appropriate.
| 32 |
Shares of Simmons common stock and Simmons series C preferred stock to be received by Reliance shareholders and holders of Reliance series C preferred stock as a result of the merger will have rights different from the shares of Reliance common stock and Reliance series C preferred stock.
The rights of Reliance shareholders and holders of Reliance series C preferred stock are currently governed by the restated articles of incorporation of Reliance, which we refer to as the Reliance charter, and the amended and restated bylaws of Reliance, which we refer to as the Reliance bylaws. Upon completion of the merger, the rights of former Reliance shareholders and holders of Reliance series C preferred stock will be governed by the Simmons charter and the Simmons bylaws. Simmons is organized under Arkansas law, while Reliance is organized under Missouri law. The rights associated with Reliance common stock are different from the rights associated with Simmons common stock. The terms of the Reliance series C preferred stock will be substantially similar to the terms of the Simmons series C preferred stock, but will be governed by the Simmons charter, the Simmons bylaws, and Arkansas law. Please see the section entitled “Comparison of Shareholders’ Rights” for a discussion of the different rights associated with Simmons common stock, “Comparison of Shareholders’ Rights of Simmons and Reliance Series C Preferred Stock” for a discussion of the different rights associated with Simmons series C preferred stock, and “Description of New Simmons Series C Preferred Stock” for a description of the rights associated with Simmons series C preferred stock.
Combining the two companies may be more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the mergers may not be realized.
The success of the mergers will depend on, among other things, the combined company’s ability to combine the businesses of Simmons and Reliance. If the combined company is not able to successfully achieve this objective, the anticipated benefits of the mergers may not be realized fully, or at all, or may take longer to realize than expected.
Simmons and Reliance have operated and, until the completion of the mergers, will continue to operate, independently. The success of the mergers, including anticipated benefits and cost savings, will depend, in part, on the successful combination of the businesses of Simmons and Reliance. To realize these anticipated benefits and cost savings, after the completion of the mergers, Simmons expects to integrate Reliance’s business into its own. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the mergers. The loss of key employees could have an adverse effect on the companies’ financial results and the value of their common stock. If Simmons experiences difficulties with the integration process, the anticipated benefits of the mergers may not be realized fully, or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause Simmons or Reliance to lose current customers or cause current customers to remove their accounts from Simmons or Reliance and move their business to competing financial institutions. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of Simmons or Reliance during this transition period and for an undetermined period after consummation of the mergers.
The combined company expects to incur substantial expenses related to the mergers.
The combined company expects to incur substantial expenses in connection with consummation of the mergers and combining the business, operations, networks, systems, technologies, policies and procedures of the two companies. Although Simmons and Reliance have assumed that a certain level of transaction and combination expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their combination expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Due to these factors, the transaction and combination expenses associated with the mergers could, particularly in the near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the combination of the businesses following the consummation of the mergers. As a result of these expenses, both Simmons and Reliance expect to take charges against their earnings before and after the completion of the mergers. The charges taken in connection with the mergers are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.
| 33 |
Holders of Simmons and Reliance common stock will have a reduced ownership and voting interest after the merger and will exercise less influence over management.
Holders of Simmons and Reliance common stock currently have the right to vote for the election the directors and on other matters affecting Simmons and Reliance, respectively. Upon the completion of the merger, each Reliance shareholder who receives shares of Simmons common stock will become a shareholder of Simmons with a percentage ownership of Simmons common stock that is smaller than such shareholder’s percentage ownership of Reliance common stock. Following completion of the merger, it is currently expected that former holders of Reliance common stock as a group will own approximately [ ]% of the combined company’s common stock and existing Simmons shareholders as a group will own approximately [ ]% of the combined company’s common stock, assuming the current shares of Reliance series C preferred stock outstanding are not converted into shares of Reliance common stock prior to the effective time and the Reliance convertible debt is converted into [ ] shares of Reliance common stock immediately prior to the effective time. As a result, Reliance shareholders will have less influence on the management and policies of the combined company than they now have on the management and policies of Reliance, and existing Simmons shareholders may have less influence than they now have on the management and policies of Simmons.
Risks Relating to an Investment in Simmons Common Stock
The market price of Simmons common stock may decline as a result of the mergers.
The market price of Simmons common stock may decline as a result of the mergers if Simmons does not achieve the perceived benefits of the mergers or the effect of the mergers on Simmons’ financial results is not consistent with the expectations of financial or industry analysts. In addition, upon completion of the mergers, Simmons and Reliance shareholders will own interests in a combined company operating an expanded business with a different mix of assets, risks and liabilities. Existing Simmons and Reliance shareholders may not wish to continue to invest in the combined company, or for other reasons may wish to dispose of some or all of their shares of the combined company.
Simmons’ management will have broad discretion as to the use of assets acquired from these mergers, and Simmons may not use these assets effectively.
Simmons’ management will have broad discretion in the application of the assets from these mergers and could utilize the assets in ways that do not improve Simmons’ results of operations or enhance the value of its common stock. Reliance shareholders will not have the opportunity, as part of their investment decision, to assess whether these acquired assets are being used appropriately. Simmons’ failure to utilize these assets effectively could have a material adverse effect on the combined company’s business, financial condition and results of operations and cause the price of Simmons common stock to decline.
Simmons’ rights and the rights of Simmons shareholders to take action against Simmons’ directors and officers are limited.
The Simmons charter eliminates Simmons’ directors’ liability to Simmons and its shareholders for money damages for breach of fiduciary duties as a director to the fullest extent permitted by Arkansas law. Arkansas law provides that an officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in Simmons’ best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances.
The Simmons charter and bylaws also require Simmons to indemnify Simmons’ directors and officers for liability resulting from actions taken by them in those capacities to the maximum extent permitted by Arkansas law. As a result, Simmons shareholders and Simmons may have more limited rights against Simmons’ directors and officers than might otherwise exist under common law. In addition, Simmons may be obligated to fund the defense costs incurred by Simmons’ directors and officers.
| 34 |
An investment in Simmons common stock is not an insured deposit.
An investment in Simmons common stock is not a bank deposit and is not insured or guaranteed by the FDIC, the Deposit Insurance Fund, or any other government agency. Accordingly, you should be capable of affording the loss of any investment in Simmons common stock.
There may be future sales of additional common stock or preferred stock or other dilution of our equity, which may adversely affect the value of our common stock.
We are not restricted from issuing additional common stock or preferred stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or preferred stock or any substantially similar securities. The value of our common stock could decline as a result of sales by us of a large number of shares of common stock or preferred stock or similar securities in the market or the perception that such sales could occur.
Risks Relating to an Investment in New Simmons Series C Preferred Stock
The Simmons series C preferred stock to be received by holders of Reliance series C preferred stock in the merger will not be listed or traded on any exchange.
The Simmons series C preferred stock to be issued by Simmons to holders of Reliance series C preferred stock in the merger will not be listed or traded on any exchange. No market is expected to develop for the Simmons series C preferred stock in the foreseeable future and holders of the Simmons series C preferred stock may not be able to find a buyer and sell their shares if they desired to do so.
| 35 |
This section contains information for Reliance shareholders about the Reliance special meeting. Reliance is mailing or otherwise delivering this proxy statement/prospectus to you, as a Reliance shareholder, on or about [ ], 2019. This proxy statement/prospectus is also being delivered to Reliance shareholders and holders of Reliance series C preferred stock as Simmons’ prospectus for its offering of Simmons common stock and Simmons series C preferred stock in connection with the merger. This proxy statement/prospectus is accompanied by a notice of the Reliance special meeting and a proxy card that the Reliance board of directors is soliciting for use at the Reliance special meeting and at any adjournments or postponements of the Reliance special meeting. References to “you” and “your” in this section are to Reliance shareholders.
Date, Time and Place of the Reliance Special Meeting
The Reliance special meeting will be held virtually via live webcast at [ ], on [ ], 2019, at [ ] Central Time. On or about [ ], 2019, Reliance commenced mailing or otherwise delivering this proxy statement/prospectus and the enclosed form of proxy card to its shareholders entitled to vote at the Reliance special meeting.
Purpose of the Reliance Special Meeting
At the Reliance special meeting, you will be asked to consider and vote on the following matters:
| · | the merger proposal; and |
| · | the adjournment proposal, if necessary or appropriate. |
Recommendation of the Reliance Board of Directors
The Reliance board of directors has unanimously approved the merger agreement and unanimously recommends that Reliance shareholders vote “FOR” the merger proposal and “FOR” the adjournment proposal. Please see the section entitled “The Mergers—Reliance’s Reasons for the Mergers and Recommendation of the Reliance Board of Directors” for a more detailed discussion of the factors considered by the Reliance board of directors in reaching its decision to approve the merger agreement and the transactions contemplated thereby.
Completion of the mergers is conditioned upon the approval of the merger proposal, but is not conditioned upon the approval of the adjournment proposal.
Reliance has set the close of business on [ ], 2019 as the Reliance record date to determine which Reliance shareholders will be entitled to receive notice of and vote at the Reliance special meeting. Only Reliance shareholders at the close of business on the Reliance record date will be entitled to vote at the Reliance special meeting. As of the Reliance record date, there were [75,716,428] shares of Reliance common stock outstanding and entitled to notice of, and to vote at, the Reliance special meeting, held by approximately [ ] shareholders of record. Each holder of shares of Reliance common stock outstanding on the Reliance record date will be entitled to one vote for each share held of record.
The presence at the Reliance special meeting, electronically or by proxy, of a majority of the shares of Reliance common stock outstanding and entitled to vote as of the Reliance record date will constitute a quorum for the purposes of the Reliance special meeting. All shares of Reliance common stock represented at the meeting or represented by proxy, including abstentions, if any, will be treated as present for purposes of determining the presence or absence of a quorum for all matters voted on at the Reliance special meeting.
| 36 |
If a quorum is not present at the Reliance special meeting, it will be postponed until the holders of the number of shares of Reliance common stock required to constitute a quorum attend. If additional votes must be solicited in order for Reliance shareholders to approve the merger proposal and the adjournment proposal is approved, the Reliance special meeting will be adjourned to solicit additional proxies. The Reliance special meeting may be adjourned by the affirmative vote of holders of a majority of the shares of Reliance common stock represented electronically or by proxy at the Reliance special meeting, even if less than a quorum.
Vote Required; Treatment of Abstentions and Failure to Vote
Approval of the merger proposal requires the affirmative vote of holders of at least two-thirds of the outstanding shares of Reliance common stock entitled to vote on the merger proposal. Approval of the adjournment proposal requires the affirmative vote of at least a majority of shares present electronically or represented by proxy at the Reliance special meeting and entitled to vote on the adjournment proposal.
With respect to the merger proposal, if you mark “ABSTAIN” on your proxy card, fail to either submit a proxy card or vote by telephone or the internet or at the Reliance special meeting, or are a “street name” holder and fail to instruct your bank, broker or other nominee how to vote, it will have the same effect as a vote against the merger proposal. With respect to the adjournment proposal, if you mark “ABSTAIN” on your proxy card, it will have the same effect as a vote against the adjournment proposal, and if you fail to either submit a proxy card or vote by telephone or the internet or at the Reliance special meeting, or are a “street name” holder and fail to instruct your bank, broker or other nominee how to vote, it will have no effect on such proposal.
Shares Held by Directors and Executive Officers
As of the Reliance record date, there were [75,716,428] shares of Reliance common stock entitled to vote at the Reliance special meeting. As of the Reliance record date, the directors and executive officers of Reliance and their affiliates beneficially owned and were entitled to vote approximately [40,608,521] shares of Reliance common stock, representing approximately [53.6]% of the shares of Reliance common stock outstanding on that date. Thomas H. Brouster, Sr., is the holder of irrevocable proxies previously granted by certain of the Reliance shareholders, including shareholders that are Reliance directors and executive officers, that give Mr. Brouster sole authority to vote [34,647,909] shares of Reliance common stock as of the Reliance record date in addition to the shares of Reliance common stock owned of record by him. Reliance currently expects that the shares of Reliance common stock beneficially owned by its directors and executive officers will be voted in favor of the merger proposal and the adjournment proposal. Each of Mr. Brouster and Gaines S. Dittrich, in their capacities as individuals, have separately entered into a Reliance voting agreement pursuant to which they agreed to vote their beneficially owned shares of Reliance common stock in favor of the merger proposal and certain related matters and against alternative transactions. For further information, please see the section entitled “The Merger Agreement—Voting Agreements.”
Voting of Proxies; Incomplete Proxies
A Reliance shareholder may vote by proxy or at the Reliance special meeting. If you hold your shares of Reliance common stock in your name as a shareholder of record, you may use one of the following methods to submit a proxy as a Reliance shareholder:
| · | through the internet by visiting [ ] and following the instructions, using the control number provided on your proxy card; |
| · | by telephone by calling [ ] and following the recorded instructions, using the control number provided on your proxy card; or |
| · | by mail by completing, signing, dating and returning the proxy card in the enclosed envelope, which requires no additional postage if mailed in the United States. |
When a properly executed proxy card is returned, the shares of Reliance common stock represented by it will be voted at the Reliance special meeting in accordance with the instructions contained on the proxy card. If any proxy card is returned without indication as to how to vote, the shares of Reliance common stock represented by the proxy card will be voted as recommended by the Reliance board of directors.
The deadline for voting by telephone or the internet as a shareholder of record is [ ], Central Time, on [ ], 2019. For Reliance shareholders whose shares are registered in the name of a bank, broker or other nominee, please consult the voting instructions provided by your bank, broker or other nominee for information about the deadline for voting by telephone or the internet.
| 37 |
If a Reliance shareholder’s shares are held in “street name” by a bank, broker or other nominee, the shareholder should check the voting form used by that firm to determine how to vote. You may not vote shares held in “street name” by returning a proxy card directly to Reliance or by voting at the Reliance special meeting unless you provide a “legal proxy,” which you must obtain from your bank, broker or other nominee.
Every Reliance shareholder’s vote is important. Accordingly, you should complete, sign, date and return the enclosed proxy card, or submit your proxy by telephone or the internet, whether or not you plan to attend the Reliance special meeting. Because the Reliance special meeting is virtual and is being conducted electronically, shareholders will not be able to attend the special meeting in person. During the virtual meeting, you may ask questions and will be able to vote your shares electronically. To participate, you will need the 16-digit control number provided on the proxy card. Additional directions for participating in the special meeting are available at [ ]. We encourage you to allow ample time for online check-in, which will begin at [ ] Central Time on [ ], 2019.
If your shares are held in “street name” by a bank, broker or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Under stock exchange rules, banks, brokers and other nominees who hold shares of Reliance common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers and other nominees are not allowed to exercise voting discretion with respect to the approval of matters determined to be “non-routine,” without specific instructions from the beneficial owner. Reliance expects that all proposals to be voted on at the Reliance special meeting will be “non-routine” matters. Broker non-votes are shares held by a bank, broker or other nominee with respect to which such entity is not instructed by the beneficial owner of such shares to vote on the particular proposal and the broker does not have discretionary voting power on such proposal. If your bank, broker or other nominee holds your shares of Reliance common stock in “street name,” such entity will vote your shares of Reliance common stock only if you provide instructions on how to vote by complying with the voter instruction form sent to you by your bank, broker or other nominee with this proxy statement/prospectus.
Revocability of Proxies and Changes to a Reliance Shareholder’s Vote
If you hold stock in your name as a shareholder of record, you may change your vote or revoke any proxy at any time before it is voted by (1) completing, signing, dating and returning a proxy card with a later date, (2) delivering a written revocation letter to Reliance’s corporate secretary, (3) vote via live webcast at the Reliance special meeting at [ ], or (4) voting by telephone or the internet at a later time (but prior to the internet and telephone voting deadline). If you choose to send a completed proxy card bearing a later date than your original proxy card, the new proxy card must be received before the beginning of the Reliance special meeting.
Any Reliance shareholder entitled to vote at the Reliance special meeting may vote regardless of whether or not a proxy has been previously given, but simply attending the Reliance special meeting (without notifying Reliance’s corporate secretary) will not constitute revocation of a previously given proxy.
Written notices of revocation and other communications about revoking your proxy card should be addressed to:
Reliance Bancshares, Inc.
10401 Clayton Road
Frontenac, Missouri 63131
Attention: Allan
D. Ivie IV
If your shares are held in “street name” by a bank, broker or other nominee, you should follow the instructions of your bank, broker or other nominee regarding the revocation of voting instructions.
| 38 |
Reliance is soliciting proxies from Reliance shareholders in conjunction with the mergers. Reliance will bear the entire cost of soliciting proxies from Reliance shareholders. In addition to solicitation of proxies by mail, Reliance will request that banks, brokers and other record holders send proxies and proxy material to the beneficial owners of Reliance common stock and secure their voting instructions. Reliance will reimburse the record holders for their reasonable expenses in taking those actions. If necessary, Reliance may use its directors, officers or employees, who will not be specially compensated, to solicit proxies from Reliance shareholders, either personally or by telephone, facsimile, letter or electronic means.
Attending the Reliance Special Meeting
If you are a Reliance shareholder as of the Reliance record date, you may vote your shares at the virtual Reliance special meeting by following the instructions for joining and voting at the special meeting posted at [ ]. However, there will be very limited time to vote at the special meeting, and thus, you are encouraged to vote in advance or immediately at the start of the meeting. To vote during the meeting, you will need the 16-digit control number provided on your proxy card or voting instruction form. [ ] is hosting our virtual special meeting and, on the date of the special meeting, will be available via telephone at [ ] to answer your questions regarding how to attend and participate in the special meeting via the Internet. Even if you currently plan to attend the Reliance special meeting, it is recommended that you also submit your proxy as described below, so your vote will be counted if you later decide not to attend the meeting. If you submit your vote by proxy and later decide to vote at the meeting, the vote you submit at the meeting will override your proxy vote. If your shares of Reliance common stock are held in “street name” by a bank, broker or other nominee, please follow the instructions on the voting instruction form provided by the record holder.
As permitted by applicable law, only one copy of this proxy statement/prospectus is being delivered to shareholders residing at the same address, unless such shareholders have notified Reliance of their desire to receive multiple copies of the proxy statement/prospectus.
Reliance will promptly deliver, upon oral or written request, a separate copy of the proxy statement/prospectus to any shareholder residing at an address to which only one copy of such document was mailed. Requests for additional copies should be directed to Reliance’s President, Allan D. Ivie IV, at 10401 Clayton Road, Frontenac, Missouri 63131 or by telephone at (314) 569-7200.
If you need assistance in completing your proxy card, have questions regarding the Reliance special meeting, or would like additional copies of this proxy statement/prospectus, please contact Reliance’s President, Allan D. Ivie IV, at (314) 569-7200.
| 39 |
Reliance is asking Reliance shareholders to approve the merger agreement pursuant to which Reliance will merge with and into Simmons. For a detailed discussion of the terms and conditions of the merger agreement, please see the section entitled “The Merger Agreement.” Reliance shareholders should read this proxy statement/prospectus, including any documents incorporated in this proxy statement/prospectus by reference, and its annexes, carefully and in their entirety for more detailed information concerning the merger agreement and the mergers. A copy of the merger agreement is attached to this proxy statement/prospectus as Annex A.
As discussed in the section entitled “The Mergers—Reliance’s Reasons for the Mergers and Recommendation of the Reliance Board of Directors,” after careful consideration, the Reliance board of directors unanimously approved the merger agreement and declared the merger agreement and the transactions contemplated thereby, including the mergers, to be advisable and in the best interest of Reliance and the Reliance shareholders.
Required Vote
Approval of the merger proposal requires the affirmative vote of holders of at least two-thirds of the outstanding shares of Reliance common stock entitled to vote on the merger proposal. If you mark “ABSTAIN” for the merger proposal on your proxy card, fail to either submit a proxy card or vote by telephone or the internet or at the Reliance special meeting, or are a “street name” holder and fail to instruct your bank, broker or other nominee how to vote, it will have the same effect as a vote against the merger proposal.
The Reliance board of directors unanimously recommends that Reliance shareholders vote “FOR” the merger proposal.
Proposal 2: Adjournment Proposal
Reliance is asking Reliance shareholders to approve the adjournment of the Reliance special meeting to another date and place if necessary or appropriate to solicit additional votes in favor of the merger proposal if there are insufficient votes at the time of such adjournment to approve the merger proposal.
If, at the Reliance special meeting, there is an insufficient number of shares of Reliance common stock present electronically or represented by proxy and voting in favor of the merger proposal, Reliance will move to adjourn the Reliance special meeting in order to enable the Reliance board of directors to solicit additional proxies for approval of the merger proposal. If the Reliance shareholders approve the adjournment proposal, Reliance may adjourn the Reliance special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from Reliance shareholders who have previously voted. Notice need not be given of the adjourned meeting if the time and place of the adjourned meeting are announced at the Reliance special meeting. If the adjournment is for more than 90 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the date and place of the adjourned meeting must be given to each shareholder of record entitled to vote at the meeting. Even if a quorum is not present, the Reliance special meeting may be adjourned by the affirmative vote of the holders of a majority of the shares of Reliance common stock represented electronically or by proxy at the Reliance special meeting.
Required Vote
Approval of the adjournment proposal requires the affirmative vote of at least a majority of shares present electronically or represented by proxy at the Reliance special meeting and entitled to vote on the adjournment proposal. If you mark “ABSTAIN” for the adjournment proposal on your proxy card, it will have the same effect as a vote against the adjournment proposal, and if you fail to either submit a proxy card or vote by telephone or the internet or at the Reliance special meeting, or are a “street name” holder and fail to instruct your bank, broker or other nominee how to vote, it will have no effect on the adjournment proposal.
The Reliance board of directors unanimously recommends that Reliance shareholders vote “FOR” the adjournment proposal.
Other Matters to Come Before the Reliance Special Meeting
As of the date of this proxy statement/prospectus, the Reliance board of directors is not aware of any matters that will be presented for consideration at the Reliance special meeting other than as described in this proxy statement/prospectus. If, however, the Reliance board of directors properly brings any other matters before the Reliance special meeting, the persons named in the proxy will vote the shares represented thereby in accordance with the recommendation of the Reliance board of directors on any such matter.
| 40 |
INFORMATION ABOUT THE COMPANIES
Simmons First National Corporation
501 Main Street
Pine Bluff, Arkansas 71601
Telephone: (870) 541-1000
Simmons is a financial holding company registered under the BHC Act. Simmons is headquartered in Arkansas and as of September 30, 2018, had, on a consolidated basis, total assets of $16.3 billion, total net loans of $11.8 billion, total deposits of $12.1 billion and total shareholders’ equity of $2.2 billion. Simmons conducts its banking operations through its subsidiary bank, Simmons Bank, in 191 branches or financial centers located in communities in Arkansas, Colorado, Kansas, Missouri, Oklahoma, Tennessee and Texas. Simmons common stock is traded on Nasdaq under the symbol “SFNC.”
Simmons is committed to the community bank philosophy of encouraging local customer engagement and local decision making, thereby producing a more responsive and satisfactory experience for its customers. Simmons also believes its model empowers its bankers to enhance shareholder value through developing and growing holistic customer relationships. As Simmons focuses on the communities in which it primarily operates, it provides a wide range of consumer and commercial loan and deposit products to individuals and businesses in its core markets. Simmons also has developed through its experience and scale and through acquisitions, including the pending acquisition that is the subject of this proxy statement/prospectus, specialized products and services that are in addition to those offered by the typical community bank and that are provided in many cases to customers beyond its core market area. Those products include credit cards, personal and corporate trust services, investments, insurance, agricultural finance lending, equipment lending, consumer finance and Small Business Administration lending.
Simmons seeks to build shareholder value by (1) focusing on strong asset quality, (2) maintaining strong capital, (3) managing its liquidity position, (4) improving its operational efficiency and (5) opportunistically growing its business, both organically and through acquisitions of financial institutions.
Additional information about Simmons may be found in the documents incorporated by reference into this proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information.”
Reliance Bancshares, Inc.
10401 Clayton Road
Frontenac, MO 63131
Telephone: (314) 569-7200
Reliance History
Reliance is a bank holding company which was incorporated in Missouri in 1998. Reliance organized Reliance Bank, which obtained deposit insurance from the FDIC and began conducting business in 1999 in Des Peres, Missouri. Like many financial institutions during the recent financial crisis, Reliance and its subsidiaries experienced substantial financial losses, totaling approximately $111.9 million from 2008 to 2011 (comprised of $29.4 million in 2009, $48.5 million in 2010 and $34.0 million in 2011), and resulting regulatory difficulties. As part of its extensive efforts to restore Reliance’s financial health and comply with regulatory requirements, and after exhaustive other efforts to recapitalize Reliance proved unsuccessful, the then-board of directors of Reliance reached out in 2012 to Thomas H. Brouster, Sr. and Gaines S. Dittrich to assist in the recapitalization and turnaround of Reliance. Mr. Brouster and Mr. Dittrich, through companies owned by them, entered into consulting agreements with Reliance Bank under which they provided management assistance and also developed a capital plan. Thereafter, during March 2013, Mr. Brouster and Mr. Dittrich effected a recapitalization transaction, which we refer to as the 2013 recapitalization, in which an investor group organized and led by Mr. Brouster invested $30,950,000 in Reliance in exchange for Reliance common stock, Reliance convertible debt, and Reliance warrants. The 2013 recapitalization transaction was approved by Reliance’s then-board of directors and its then-shareholders and was for a price of $0.50 per share. All of the shares of Reliance common stock issued in the 2013 recapitalization were issued at $0.50 per share in an offering in which all of the then-shareholders of Reliance were provided the opportunity to participate at the same $0.50 per share offering price. The conversion price of the Reliance convertible debt and the exercise price of the Reliance warrants were established at the same $0.50 per share offering price of the Reliance common stock. Upon completion of the 2013 recapitalization, Mr. Brouster was appointed chairman of the board of Reliance and Reliance Bank, and Mr. Dittrich was appointed Vice-Chairman of Reliance and Reliance Bank.
| 41 |
Reliance Business
Reliance, through Reliance Bank, operates through 22 offices in Missouri and Illinois, all of which are in the St. Louis, Missouri metropolitan area. Reliance Bank provides a full range of products and services designed to meet the financial needs of the businesses and individuals in the communities it serves. The majority of Reliance’s customers are based in the St. Louis metropolitan area. The banking and financial services industry in the St. Louis metropolitan area is highly competitive in both the business and consumer deposit and loan markets, and competition continues to intensify. Generally, Reliance Bank competes for banking customers and deposits with other local, regional, national and internet banks and savings and loan associations, personal loan and finance companies, credit unions, mutual funds and securities brokers-dealers.
Reliance Bank provides commercial real estate, residential real estate, commercial and industrial, consumer and construction lending products and services to its customers in addition to offering a wide range of deposit products and services. Reliance Bank also offers consumer lending products, such as home mortgage loans, home equity lines of credit and term loans, new and used auto loans and credit cards. Reliance Bank provides finance for working capital lines of credit, equipment loans, commercial vehicles, real estate loans, business equity lines of credit, small business administration loans and construction loans. Reliance offers online, mobile and telephone banking services, bill pay, and online order checks, as well as treasury management and business services. As of September 30, 2018, Reliance had, on a consolidated basis, total assets of $1.5 billion, total loans of $1.1 billion, total deposits of $1.2 billion.
Reliance does not have a class of securities registered under Section 12 of the Exchange Act, is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, and, accordingly, does not file documents or reports with the SEC. Reliance common stock trades on the OTC Pink Market under the symbol “RLBS.”
| 42 |
The following discussion contains material information regarding the mergers. The discussion is subject to, and qualified in its entirety by reference to, the merger agreement, which is attached to this proxy statement/prospectus as Annex A and is incorporated by reference herein. The following is not intended to provide factual information about the parties or any of their respective subsidiaries or affiliates. This discussion does not purport to be complete and may not contain all of the information about the mergers that is important to you. We urge you to read carefully this entire proxy statement/prospectus, including the merger agreement, for a more complete understanding of the mergers.
Each of the Simmons board of directors and the Reliance board of directors unanimously approved the merger agreement. The merger agreement provides that, among other things, (i) Reliance will merge with and into Simmons with Simmons continuing as the surviving corporation in the merger, and (ii) simultaneously with the merger, Reliance Bank will merge with and into Simmons Bank with Simmons Bank continuing as the surviving bank in the bank merger.
Based on the assumptions set forth below, at the effective time, each share of Reliance common stock that is issued and outstanding immediately prior to the effective time, excluding certain specified shares, will be converted into the right to receive, subject to possible adjustment, (i) the per share cash consideration, and (ii) the per share stock consideration. In addition, each share of Reliance series A preferred stock and Reliance series B preferred stock will be converted into the right to receive one share of Simmons series A preferred stock or Simmons series B preferred stock, respectively, and each holder of shares of Reliance series C preferred stock will receive for each such share of Reliance series C preferred stock one share of Simmons series C preferred stock unless such holder of Reliance series C preferred stock affirmatively elects five days prior to the closing date to receive either (i) the Series C liquidation preference or (ii) the per share merger consideration that would be payable if such share had been converted to Reliance common stock prior to the effective time. The per share cash consideration and the per share stock consideration are based on the following assumptions: (i) [ ] shares of Reliance common stock are subject to outstanding Reliance stock options with a weighted average exercise price of $[ ], (ii) [ ] shares of Reliance common stock are subject to outstanding Reliance warrants with a weighted average exercise price of $[ ], (iii) all Reliance convertible debt is converted into [ ] shares of Reliance common stock immediately prior to the effective time, (iv) [ ] shares of Reliance series C preferred stock are outstanding as of the effective time, (v) no shares of Reliance series C preferred stock are converted as of the effective time, (vi) all shares of Reliance series C preferred stock are converted to shares of Simmons series C preferred stock in connection with the merger, and (vii) [ ] shares of Reliance common stock are issued and outstanding, which includes the shares of Reliance common stock to be issued upon conversion of the Reliance convertible debt. In addition, we have assumed that the Simmons average closing price prior to the effective time is equal to $[ ], which is the closing sales price on the last practicable trading day prior to printing this proxy statement/prospectus. In the aggregate, Simmons will issue 4,000,000 shares of Simmons common stock and pay $62,700,000 (minus the cash payment for outstanding stock options of Reliance, the cash payment for outstanding warrants of Reliance, shares and cash reserved for the conversion or redemption of the Reliance series C preferred stock and subject to certain other adjustments pursuant to the merger agreement) to the Reliance shareholders upon completion of the merger, in addition to the issuance of Simmons preferred stock with an aggregate liquidation value of approximately $42.1 million to holders of Reliance preferred stock. See the section entitled “The Merger Agreement—Pricing Adjustments.”
Simmons will not issue any fractional shares of Simmons common stock in the merger. Instead, a Reliance shareholder who would otherwise be entitled to receive a fraction of a share of Simmons common stock will receive, in lieu thereof, an amount in cash, rounded up to the nearest cent (without interest), determined by multiplying (i) the fraction of a share (rounded to the nearest thousandth when expressed as a decimal form) of Simmons common stock that such shareholder would otherwise be entitled to receive by (ii) the Simmons average closing price.
Reliance shareholders are being asked to approve the merger agreement. See the section entitled “The Merger Agreement” for additional and more detailed information regarding the legal documents that govern the mergers, including information about the conditions to consummation of the mergers and the provisions for terminating or amending the merger agreement.
| 43 |
After experiencing substantial financial losses and resulting regulatory difficulties during the recent financial crisis, the Reliance board of directors and Reliance’s subsidiary Reliance Bank orchestrated a turnaround of the organization’s financial health during 2012 and the early part of 2013. The objective was to rebuild Reliance Bank, after this difficult period, with new deposits and new loans to return Reliance Bank to profitability, while always looking for opportunities to create value for all Reliance shareholders.
Many discussions took place between the Reliance board of directors and Reliance’s management regarding strategies to enhance shareholder value. Consideration was given to organic growth, acquisition of targeted institutions within the St. Louis area, possible mergers with similar competitors, as well as a potential sale of Reliance.
The Reliance board of directors was of the view that, in order to maximize the value of the organization and position itself for merger and acquisition opportunities, a history of sustained performance and earnings would be paramount. As the performance of Reliance Bank continued to improve during 2014 and 2015, it became critical, in the view of the Reliance board of directors, to complete 2016 and 2017 with a record of sustained performance and profitability.
Beginning in early 2017, conversations and meetings with various investment advisory firms were undertaken to consider Reliance’s strategic alternatives. Among these was Sandler O’Neill, a national leader in the financial institution M&A advisory business, and DD&F Consulting Group, Inc., or DD&F, an Arkansas-based regional bank consulting firm that specializes in advising financial institutions. The Reliance board of directors and Reliance’s management believed, based upon 2016 performance results and expectations for 2017 and 2018, that the latter part of 2017 and into early 2018 would be an opportune time to engage with prospective acquirers.
Reliance’s management began initial discussions with DD&F in January 2017. Reliance had engaged DD&F three years prior in connection with the sale of two of Reliance Bank’s branches in Florida. DD&F principals met with Reliance’s management in March 2017, and these discussions led to Reliance engaging DD&F to provide acquisition consulting services. As an initial part of the engagement, DD&F and Reliance’s management compiled a list of 11 potential acquirers, including Simmons. The Reliance board of directors and Reliance’s management believed that a likely fit for Reliance would be a larger financial institution with a current presence in the St. Louis market that it desired to expand.
In January 2017 Reliance’s management made initial direct contact with three of the 11 identified potential acquirers, including Simmons, and DD&F interacted with the other prospects.
As a result of this process, in June 2017 Simmons indicated an interest in a potential transaction with Reliance to add its current St. Louis area bank operations. Following execution of a customary non-disclosure agreement in July 2017, Reliance provided financial information to Simmons. George A. Makris, Jr., Chairman and Chief Executive Officer of Simmons, requested a meeting with Reliance’s management, which occurred in St. Louis in June 2017. That meeting subsequently led to a second meeting among Simmons’ and Reliance’s management teams in July 2017 in Little Rock, Arkansas. During the summer and early fall of 2017, Reliance’s management, along with DD&F, continued discussions with Simmons regarding a potential merger with Reliance.
In October 2017, after reviewing preliminary information regarding Reliance and approval by Simmons’ executive management, Simmons made an offer of approximately $200.0 million in aggregate transaction value for Reliance, with the consideration to consist of (i) cash and Simmons common stock in the amount of approximately $134.4 million to holders of shares of Reliance common stock and common stock equivalents (or approximately $1.41 per share of Reliance common stock), (ii) Simmons preferred stock to the holders of Reliance preferred stock (with an aggregate liquidation value of approximately $42.1 million) and (iii) $23.5 million in cash to repay Reliance’s third-party debt. That offer was rejected by the Reliance board of directors, and in October 2017 Reliance proposed a counter offer at $2.00 per share of Reliance common stock and common stock equivalent (with the value of the consideration to be issued to holders of Reliance preferred stock and the debt repayment remaining the same), which Simmons in turn rejected. Later during October 2017, Simmons submitted a revised proposal that included a dividend from Reliance Bank to Reliance of $35.0 million prior to closing, which would have had the effect of increasing the consideration to holders of shares of Reliance common stock and common stock equivalents to approximately $1.75 per share (again with the value of the consideration to be issued to holders of Reliance preferred stock and the debt repayment remaining the same as in Simmons’ initial offer). This proposal was also rejected. Following communication of the rejected offer to Simmons, the two parties discontinued discussions.
| 44 |
Reliance’s management renewed conversations with Simmons’ management in the early part of 2018. Simmons indicated that it remained interested, but desired to postpone further merger discussions until late summer or early fall of 2018.
Throughout this same time period of the interaction between Reliance’s and Simmons’ management teams in the summer and fall of 2017, Reliance’s management was also engaging in discussions with other potential acquirers. One of these potential acquirers, which we refer to as Company A, had just completed an add-on acquisition in the St. Louis market and was interested in further expanding its retail presence. After exchanging non-disclosure agreements and certain financial information, Reliance’s management met with management of Company A in July 2017.
As a result of Reliance’s management’s continued conversations with Company A, Company A sent a letter to Reliance in November 2017 presenting an offer of approximately $205.6 million to $210.6 million in aggregate transaction value (including the value to be received by holders of Reliance preferred stock and the amounts required to repay Reliance’s third-party debt) and thus approximately $140.0 million to $145.0 million in aggregate transaction value to holders of shares of Reliance common stock and common stock equivalents (or $[ ] to $[ ] per share of Reliance common stock). Company A’s proposal was for a 100% stock exchange, with no cash consideration component. This offer was presented to the Reliance executive committee and was rejected in November 2017.
After the Company A proposal was rejected, Company A reached out to Reliance’s management and requested a meeting in early December 2017 to discuss their continuing interest and their prior proposal. The result of the negotiations at that meeting did not change Company A’s earlier offer, and Reliance’s management suspended discussions with Company A at that point.
In November 2017, the chairman of another potential acquirer, which we refer to as Company B, informed Reliance’s management of its desire to begin discussions with Reliance regarding a potential transaction. A meeting was held between Reliance’s management and Company B’s senior management at Company B’s headquarters in the later part of November 2017. At this meeting it was agreed that a non-disclosure agreement would be executed and that certain financial information be exchanged between Company B and Reliance. Management of both companies continued negotiations through the winter of 2017 and into 2018.
Further discussions between the managements of Reliance and Company B resulted in Company B submitting a letter of intent to Reliance in July 2018 offering an aggregate transaction value of approximately $230.6 million (including the value to be received by holders of Reliance preferred stock and the amounts required to repay Reliance’s third-party debt) and thus approximately $165 million to holders of Reliance common stock, with the consideration consisting of approximately 85% common stock of Company B and 15% cash. This proposal represented approximately $1.70 per share to holders of shares of Reliance common stock and common stock equivalents. That offer was presented to the Reliance executive committee and subsequently rejected in July 2018.
During the Summer of 2017, Reliance’s management discussed a possible transaction with senior management of another potential acquirer, which we refer to as Company C, who had expressed interest in Reliance as a result of Reliance’s outreach in early 2017. These discussions resulted in the execution of a non-disclosure agreement and the exchange of certain financial information of both companies. Subsequently after much discussion, in the spring of 2018 Company C determined to discontinue discussions with Reliance due to the fact that, as a residential mortgage operator, Company C’s management believed that the expense of building a large residential mortgage function within the organizational structure of Reliance would be too expensive to justify a price commensurate with Reliance’s valuation expectations.
| 45 |
In late June 2018, Company A made a renewed proposal to Reliance. Company A presented a letter of intent which increased its initial offer to a range of approximately $250.6 million to $255.6 million in aggregate transaction value (including the value to be received by holders of Reliance preferred stock and the amounts required to repay Reliance’s third-party debt), with the consideration to holders of Reliance common stock to be between $185.0 million and $190.0 million (or $[ ] to $[ ] per share of Reliance common stock). This offer was received by Reliance’s management during the first week of July 2018. The proposed consideration for the transaction consisted of approximately 90% common stock of Company A and 10% cash. Extensive discussions ensued between the managements of Company A and Reliance in an attempt to resolve Reliance’s management’s concerns with the proposal, including the limited cash component, agreement on a specific price rather than an approximate range and stock price collar considerations. In addition, Reliance’s management was concerned with what they considered very high trading value multiples of Company A’s common stock and its potential volatility. Company A was unwilling to commit on specific price and consideration terms without first conducting extensive due diligence and subjecting Reliance to an exclusivity provision (which would have prohibited Reliance from continuing conversations with any other potential acquirers). Due to these unresolved issues the Reliance board of directors rejected Company A’s proposal, which ended further communications with Company A in July 2018.
In early summer 2018, Reliance’s management contacted Mr. Makris to renew discussions in accordance with the desired timeline previously indicated by Simmons. The discussions centered around an update regarding Reliance’s business, performance and prospects. Reliance’s management discussed pricing objectives with DD&F, and DD&F then proceeded to negotiate with Simmons on Reliance’s behalf.
Simmons’ management indicated it could be willing to increase Simmons’ prior offer from the fall of 2017 to an amount that would meet Reliance’s objectives, subject to further due diligence efforts.
On July 9, 2018, Reliance engaged Sandler O’Neill as a financial advisor. Under the terms of the engagement, Sandler O’Neill generally was to assist and advise Reliance in connection with a potential transaction. The engagement specifically excluded, however, any transaction with potential acquirers who previously had been contacted by DD&F, one of which was Simmons, except that Sandler O’Neill was engaged to render a fairness opinion in the event a transaction with Simmons transpired.
In late July 2018, Reliance’s management conducted a conference call with Simmons executives and discussed Simmons’ renewed proposed offer for Reliance, which consisted of two options: (1) a combination of shares of Simmons common stock and cash, with 75% being Simmons common stock and 25% cash, for total consideration to holders of Reliance common stock of approximately $187.5 million, or $[ ] per share of Reliance common stock (which equated to total merger consideration of approximately $253.1 million including the value to be received by holders of Reliance preferred stock and the amounts required to repay Reliance’s third-party debt), or (2) a combination of shares of Simmons common stock and cash, with 70% being Simmons common stock and 30% cash, for total consideration to holders of Reliance common stock of $185 million, or $[ ] per share of Reliance common stock (which equated to total merger consideration of approximately $250.6 million including the value to be received by holders of Reliance preferred stock and the amounts required to repay Reliance’s third-party debt). After consideration, the Reliance board of directors chose a combination of 75% shares of Simmons common stock and 25% cash. The valuation of both these offers was based upon the trading price of $31.40 per share of Simmons common stock as of July 24, 2018. The average daily trading price of Simmons common stock over the prior approximately 45 days, at that time, was approximately $31.15 per share. Based upon these considerations, Simmons agreed to provide a letter of intent outlining these specific price provisions and other primary transaction terms.
Prior to receiving the letter of intent, there was a decline in the trading price of Simmons common stock. As a result, Reliance’s management and Simmons’ management negotiated additional shares of Simmons common stock within the stock portion of the consideration and additional cash which resulted in the final agreed upon consideration package aggregating approximately $253.9 million, consisting of (i) 4.5 million shares of Simmons common stock (valued at the then-prevailing market price of $31.40) and $47.0 million in cash, or approximately $188.3 million to the holders of Reliance common stock and common stock equivalents, or $[ ] per share of Reliance common stock, (ii) Simmons preferred stock to the holders of Reliance preferred stock (with an aggregate liquidation value of approximately $42.1 million) and (iii) the repayment of Reliance’s third-party debt of approximately $23.5 million.
| 46 |
On August 3, 2018, after approval by Simmons’ executive management of the terms of the revised letter of intent, Simmons submitted the letter to Reliance, and the Reliance board of directors held a special meeting to review Simmons’ letter. The Reliance board of directors noted that the newly revised letter of intent from Simmons reflected the financial terms sought by the Reliance board of directors. On August 3, 2018, following the approval of the full Reliance board of directors, Reliance’s management executed the letter of intent as submitted by Simmons.
Shortly after the execution of the letter of intent, Simmons submitted to Reliance a due diligence request list, and Reliance commenced uploading materials to an online data room in response to Simmons’ request. Beginning in September 2018, a team of Simmons’ officers and employees began an extensive on-site due diligence review of Reliance and Reliance Bank and off-site due diligence, primarily through the online data room, was undertaken by other Simmons personnel and representatives. Simmons’ due diligence process continued through the end of October 2018.
Beginning in mid-October 2018, Reliance and its financial, legal and accounting advisers conducted a reverse due diligence investigation of Simmons. On October 15, 2018, Reliance’s management met with Simmons’ management team, including its senior executives, in Little Rock, Arkansas, to discuss business, financial, operational, legal and other due diligence matters concerning Simmons and its business. A representative of DD&F participated in the meeting. Management of Simmons and Reliance continued to discuss issues related to diligence and the potential integration of Reliance into Simmons during this time.
On October 23, 2018, Simmons circulated to Lewis Rice, LLC, Reliance’s legal counsel, which we refer to as Lewis Rice, a draft of the merger agreement. Simmons conditioned the signing of a final merger agreement upon several related matters, including a unanimous vote of the Reliance board of directors and the execution by Reliance’s chairman and vice-chairman, each in his capacity as an individual, of a Reliance voting agreement requiring that they vote their beneficially owned shares of Reliance common stock in favor of the merger proposal and certain related matters and against alternative transactions. Negotiation of the merger agreement and the related transaction documents, including the Reliance voting agreements, and discussions regarding the merger agreement among Reliance and its legal and financial advisors, continued throughout late October and the first part of November 2018. During this period, Reliance and Simmons exchanged several additional drafts of the merger agreement and the related transaction documents, including the Reliance voting agreements.
Beginning in early October and into November 2018, the stock market experienced significant fluctuations, with many bank stocks being negatively affected. The Reliance board of directors instructed Reliance’s management to contact Simmons to determine if the transaction consideration could be adjusted given the downward trend in bank stocks generally and in Simmons common stock price specifically. After further considering the proposed terms of the transaction and Reliance’s request, Simmons agreed to revise its proposal, reducing the number of shares of Simmons common stock being exchanged from 4.5 million to 4.0 million and increasing the cash consideration from $47 million to $62.7 million, thereby further insulating the aggregate transaction value from the downward trajectory of the market for the stocks of financial institutions. The merger agreement was updated to reflect these terms.
On November 13, 2018, the Reliance board of directors held a special meeting. Representatives from Lewis Rice, DD&F, Sandler O’Neill and Cummings, Ristau & Associates, P.C. (Reliance’s independent auditor), which we refer to as Cummings Ristau, participated in the meeting. At the meeting, the Reliance board of directors reviewed in detail the final merger agreement, ancillary agreements, including the Reliance voting agreements, and related summaries and supplemental materials. The Reliance board of directors discussed in detail, with the participation of all financial, legal and accounting advisers, the aggregate value of the proposed merger consideration (that is, including the value to be received from Simmons by holders of Reliance preferred stock and the repayment of Reliance’s third-party debt). Reliance’s management, DD&F, Cummings Ristau and Lewis Rice provided overviews of their reverse due diligence reviews of Simmons. Also at this meeting, Sandler O’Neill delivered to the Reliance board of directors its oral opinion, which was subsequently confirmed in writing on November 13, 2018, to the effect that, as of such date, the per share merger consideration was fair to the holders of Reliance common stock from a financial point of view. For a description of Sandler O’Neill’s opinion, please refer to “—Opinion of Sandler O’Neill & Partners, L.P.” below. After considering the proposed terms of the merger agreement, the Reliance voting agreements and the various presentations of its financial, legal and accounting advisors, and the matters discussed during that meeting and prior meetings of the Reliance board of directors, including the factors described under the section of this proxy statement/prospectus entitled “—Reliance’s Reasons for the Mergers and Recommendations of the Reliance Board of Directors,” the Reliance board of directors determined that the merger agreement, including the mergers and the other transactions contemplated thereby, were in the best interests of Reliance and its shareholders, and the Reliance board of directors unanimously approved the merger agreement and the transactions contemplated thereby and determined to recommend that Reliance’s shareholders approve the merger agreement.
| 47 |
On November 13, 2018, the Simmons board of directors held a meeting to consider the terms of the proposed merger and merger agreement. At the meeting, members of Simmons’ management reported on the status of due diligence and negotiations with Reliance. Also at the meeting, Simmons’ financial advisor reviewed with the Simmons board of directors financial aspects of the proposed merger. At the meeting, Simmons’ internal legal counsel reviewed with the Simmons board of directors its fiduciary duties and reviewed the key terms of the merger agreement and related agreements (including the Reliance voting agreements), as described elsewhere in this proxy statement/prospectus, including a summary of the provisions relating to governance of the combined company and the provisions relating to employee matters.
After considering the proposed terms of the merger agreement, the terms of the Reliance voting agreements, and taking into consideration the matters discussed during that meeting and prior meetings of the Simmons board of directors, including the factors described under “—Simmons’ Reasons for the Mergers,” the Simmons board of directors unanimously determined that the merger was consistent with Simmons’ business strategies and in the best interests of Simmons and Simmons shareholders and the Simmons board of directors voted unanimously to approve and adopt the merger agreement, the mergers and the other transactions contemplated by the merger agreement.
Following the board meetings of Reliance and Simmons on November 13, 2018, and after finalizing the merger agreement, Reliance and Simmons executed the merger agreement, and Reliance, Simmons, and Reliance’s chairman and vice chairman executed the Reliance voting agreements. On November 13, 2018, Reliance and Simmons issued a joint press release announcing the execution of the merger agreement.
Reliance’s Reasons for the Mergers and Recommendation of the Reliance Board of Directors
At a special board meeting held on November 13, 2018, the Reliance board of directors unanimously approved the merger agreement, the mergers and the transactions contemplated by the merger agreement, determining that the merger is advisable and fair to, and in the best interest of, Reliance and its shareholders.
In reaching its decision to approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement and to unanimously recommend that Reliance shareholders vote “FOR” the merger proposal, the Reliance board of directors consulted with Reliance’s management, as well as Reliance’s financial, legal and accounting advisors (including its financial advisors DD&F and Sandler O’Neill). The Reliance board of directors considered a number of factors, including, without limitation, the following material factors, which are not presented in order of priority:
| · | information with respect to the businesses, earnings, operations, financial condition, prospects, capital levels and asset quality of Reliance and Simmons, both individually and after giving effect to the mergers; | |
| · | the market value of Simmons common stock prior to the execution of the merger agreement and the prospects for future appreciation of Simmons common stock; | |
| · | the value to be received by Reliance shareholders in the merger as compared to shareholder value projected for Reliance as a standalone entity over the next several years; | |
| · | the trading liquidity of Simmons common stock after the merger; | |
| · | the opinion of Sandler O’Neill, dated November 13, 2018, to the Reliance board of directors as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of Reliance common stock of the per share merger consideration in the merger (subject to matters considered and qualifications and limitations described in Sandler O’Neill’s opinion, as more fully described under “—Opinion of Sandler O’Neill & Partners, L.P.” below); |
| 48 |
| · | the projected impact of the mergers on certain financial metrics of Simmons, including Simmons’ projected earnings per share and capital ratios; | |
| · | the perceived risks and uncertainties attendant to Reliance’s operation as an independent banking organization, including the risks and uncertainties related to competition in Reliance’s market area, increased operating and regulatory costs, interest rate environments and potentially increased capital requirements; | |
| · | management’s due diligence review of Simmons; | |
| · | the expected impact of the mergers on constituencies served by Reliance, including its borrowers, depositors and communities; | |
| · | the effects of the mergers on Reliance and Reliance Bank’s employees, including the ability of those employees to participate in Simmons’ benefit plans; | |
| · | the terms and provisions of the merger agreement, which Reliance reviewed with its financial, legal counsel and accounting advisors; | |
| · | the Reliance board of directors’ understanding that the merger would qualify as a “reorganization” under Section 368(a) of the Code, providing favorable tax consequences to the Reliance shareholders in the merger; | |
| · | the regulatory and other approvals required in connection with the mergers and the expected likelihood that such regulatory approvals would be received in a reasonably timely manner and without the imposition of a burdensome condition; | |
| · | the entry by affiliates of Reliance’s chairman and vice chairman into consulting agreements to continue to provide services to Simmons following the closing of the merger; | |
| · | the Reliance board of directors’ review of possible affiliation partners other than Simmons, the prospects of such other possible affiliation partners and the likelihood of any more favorable transaction with such possible affiliation partners; | |
| · | the Reliance board of directors’ consideration of the alternative of remaining independent and growing internally and remaining independent for a period of time and then selling or merging; | |
| · | the Reliance board of directors’ knowledge of the current environment in the financial services industry, including national, regional and local economic conditions and the interest rate environment, continued consolidation, the uncertainties in the regulatory climate for financial institutions, the current environment for community banks, particularly in the St. Louis, Missouri metropolitan area, and current financial market conditions and the likely effects of these factors on Reliance’s and Simmons’ potential growth, development, productivity and strategic options; | |
| · | Simmons’ successful track record with respect to acquisition transactions, including among other things, with respect to the integration of acquisitions; | |
| · | the compatibility of and complementary nature of Simmons’s business, operations and culture with those of Reliance; | |
| · | that the merger consideration would be paid through a combination of cash and the issuance of a fixed number of shares of Simmons common stock, such that the nominal value of the merger consideration would increase or decrease with the fluctuation of the day-to-day market price of Simmons common stock; |
| 49 |
| · | the possible disruption to Reliance’s business that could result from the announcement of the merger and the resulting distraction of management’s attention from the day-to-day operations of Reliance’s business; | |
| · | the fact that the interests of certain of Reliance’s directors and executive officers may be different from, or in addition to, the interests of Reliance’s other shareholders; | |
| · | the fact that the merger agreement restricts the conduct of Reliance’s business prior to the completion of the mergers which, subject to specific exceptions, could delay or prevent Reliance from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of Reliance absent the pending merger; | |
| · | the fact that: (i) Reliance would be prohibited from affirmatively soliciting acquisition proposals after execution of the merger agreement; and (ii) Reliance would be obligated to pay to Simmons a termination fee of $10,000,000 if the merger agreement is terminated under certain circumstances, which may discourage other parties potentially interested in a strategic transaction with Reliance from pursuing such a transaction; | |
| · | the Reliance board of directors’ assessment of the likelihood that the mergers would be completed in a timely manner and that the management team of the combined company would be able to successfully integrate and operate the businesses of the combined company after the mergers; | |
| · | certain anticipated merger-related costs; | |
| · | the risk that, while Reliance expects that the mergers will be consummated, there can be no assurance that all conditions to the parties’ obligations to complete the merger agreement will be satisfied, including the risk that the Reliance shareholder approval might not be obtained and, as a result, the mergers may not be consummated; and | |
| · | the Reliance board of directors’ belief that being acquired by a larger financial institution would benefit shareholders and customers in that Simmons and the surviving corporation would be better equipped to respond to economic and industry developments and to develop and build on their positions in existing markets. |
The foregoing discussion of the information and factors considered by the Reliance board of directors is not intended to be exhaustive, but, rather, includes all material factors considered by the Reliance board of directors. In reaching its decision to approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement, the Reliance board of directors did not quantify, rank or otherwise assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The Reliance board of directors considered all these factors as a whole, including discussions with and questioning of, Reliance’s management and Reliance’s financial, legal and accounting advisors (including representatives of DD&F and Sandler O’Neill), and overall considered the factors to be favorable to, and support, its determination to approve the merger agreement and the transactions contemplated thereby, including the mergers.
The Reliance board of directors collectively made its determination with respect to the mergers based on the conclusion reached by its members, based on the factors that each of them considered appropriate, that the merger agreement, the mergers and the other transactions contemplated by the merger agreement are in the best interests of Reliance and its shareholders and that the benefits expected to be achieved from the mergers outweigh the potential risks and vulnerabilities.
This explanation of the Reliance board of directors’ reasoning and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Cautionary Statement Regarding Forward-Looking Statements.”
| 50 |
For the reasons set forth above, the Reliance board of directors unanimously approved the merger agreement, the mergers and the other transactions contemplated by the merger agreement, determining that they are advisable and fair to, and in the best interest of, Reliance and its shareholders and unanimously recommends that Reliance shareholders vote “FOR” the merger proposal.
Each of Thomas H. Brouster, Sr. and Gaines S. Dittrich, in their capacities as individuals, entered into Reliance voting agreements with Simmons and Reliance pursuant to which they agreed to vote “FOR” the merger proposal and “FOR” any other matters required to be approved by the Reliance shareholders in furtherance of the merger proposal. For more information regarding the Reliance voting agreements, please see the section entitled “The Merger Agreement—Voting Agreements.”
Opinion of Sandler O’Neill & Partners, L.P.
Reliance retained Sandler O’Neill to provide a fairness opinion to the Reliance board of directors in connection with a business combination involving Reliance. Reliance selected Sandler O’Neill because Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.
At the November 13, 2018 meeting at which the Reliance board of directors considered and approved the merger agreement, Sandler O’Neill delivered to the Reliance board of directors its oral opinion, which was subsequently confirmed in writing on November 13, 2018, to the effect that, as of such date, the per share merger consideration was fair to the holders of Reliance common stock from a financial point of view. The full text of Sandler O’Neill’s opinion is attached as Annex C to this proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description of the opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of the opinion. Holders of Reliance common stock are urged to read the entire opinion carefully in connection with their consideration of the merger proposal.
Sandler O’Neill’s opinion speaks only as of the date of the opinion. The opinion was directed to the Reliance board of directors in connection with its consideration of the merger agreement and the merger and does not constitute a recommendation to any Reliance shareholder as to how such shareholder should vote at any meeting of shareholders called to consider and vote upon the approval of the merger agreement and the merger. Sandler O’Neill’s opinion was directed only to the fairness, from a financial point of view, of the per share merger consideration to the holders of Reliance common stock and did not address the underlying business decision of Reliance to engage in the merger, the form or structure of the merger or any other transactions contemplated by the merger agreement, the relative merits of the merger as compared to any other alternative transactions or business strategies that might exist for Reliance or the effect of any other transaction in which Reliance might engage. Sandler O’Neill also did not express any opinion as to the amount of compensation to be received in the merger by any Reliance or Simmons officer, director, or employee, or class of such persons, if any, relative to the amount of compensation to be received by any other Reliance shareholder. Sandler O’Neill’s opinion was approved by Sandler O’Neill’s fairness opinion committee.
In connection with its opinion, Sandler O’Neill reviewed and considered, among other things:
| · | An execution copy of the merger agreement, dated November 13, 2018; |
| · | Certain publicly available financial statements and other historical financial information of Reliance and its banking subsidiary, Reliance Bank, that Sandler O’Neill deemed relevant; |
| · | Certain publicly available financial statements and other historical financial information of Simmons and its banking subsidiary, Simmons Bank, that Sandler O’Neill deemed relevant; |
| · | Certain internal f |