Patriot National Bancorp, Inc. (“Patriot” (NASDAQ: PNBK)), the
parent company of Patriot Bank, N.A. (the “Bank”), and American
Challenger Development Corp. ( “American Challenger”), announced
today that they have entered into a definitive agreement (the
“Merger Agreement”) under which Patriot will acquire American
Challenger via a reverse subsidiary merger, with American
Challenger surviving as a wholly owned subsidiary of Patriot (the
"Merger"). Pursuant to the terms of the Merger Agreement, at the
effective time of the Merger, American Challenger common
stockholders will receive shares of Patriot common stock as
consideration and American Challenger preferred stockholders will
receive cash. The Merger will create a purpose-driven,
digital-first national bank with highly efficient operations to
generate industry leading financial performance and a technology
driven banking experience that will offer competitive rates and a
premium customer experience.
Patriot also announced today that it has entered
into separate definitive agreements (the “Investment Agreements”)
with certain investors, consisting of a private placement in an
aggregate principal amount of approximately $540 million of newly
issued Patriot voting and non-voting common stock priced at $17.69
per share, warrants for the purchase of non-voting common stock of
Patriot, and preferred stock of Patriot Bank. Patriot intends to
raise an additional principal amount of at least $350 million, for
a total capital raise of at least $890 million, and intends to
negotiate and enter into definitive agreements with other investors
for the purchase of subordinated debt securities and preferred
stock of Patriot in addition to further sales of Patriot common
stock and warrants for the purchase of Patriot non-voting common
stock (collectively, the "Recapitalization," and together with the
Merger, the “Proposed Transactions”). Pursuant to the terms and
conditions of the Investment Agreements and the Merger Agreement,
the Recapitalization and the Merger will be completed on the same
day.
Following the Merger, Patriot Bank will adopt
the American Challenger business plan and will operate as two
divisions – the Patriot Bank Division, which will continue to
operate Patriot Bank's existing business, and the American
Challenger Division, which will execute the high-growth American
Challenger business plan.
As soon as practicable following the closing of
the Proposed Transactions, Patriot Bank will adopt American
Challenger’s proprietary technology platform for its operations.
This should allow Patriot Bank to operate with a technology
cost structure that is largely fixed, in contrast to the
typical, more variable cost structure at most banks. Patriot
Bank expects this cost structure to drive efficiencies and allow it
to share the benefits with customers by offering competitive rates
on its products and a differentiated, premium customer experience.
This will include connecting with customers via video, account
opening and funding initiation in less than a minute, as well as
mortgages that close in as little as 20 days.
The Proposed Transactions have been approved by
the boards of directors of Patriot and American Challenger and are
expected to close in the first quarter of 2022, subject to the
satisfaction of customary closing conditions, including receipt of
required regulatory approvals and approval by Patriot's
shareholders.
Michael Carrazza, Chairman of
Patriot, said, “We’re excited to have engineered this
industry-disrupting merger. The combination transforms Patriot to
what will become the largest digital bank in the U.S. Customers
will benefit from an expanded array of services and a tech-savvy
banking experience, while shareholders should benefit from the
compelling value that will be created. Patriot’s team will remain
intact and will be complemented by American Challenger’s team and
digital platform capabilities.”
Felix Scherzer, Chairman and President
of American Challenger, said, “We could not be more
excited about the opportunities provided by this merger as it
propels our purpose of shaking up banking in your interest.”
Raymond J. Quinlan, Board Member and CEO
of American Challenger, will serve as CEO of the combined
entity. Quinlan said, “We are building a digital bank that will
leverage the best in technology and operational excellence to serve
our customers and communities. This will be evident in the design
and pricing of our banking products, in our delivery of superior
personal service and in our clear commitment to corporate social
responsibility. We believe in ‘banking for good’ and through our
actions we will demonstrate that we are a purpose-driven financial
institution.”
Separately, American Challenger is also
announcing today it has entered into a term sheet, which, subject
to agreement on definitive documentation, would result in a
strategic partnership with Sunlight Financial LLC,
the subsidiary of Sunlight Financial Holdings Inc., a leading
financing platform for U.S. residential solar and energy-efficient
home improvement projects, with respect to a new, multi-year loan
purchase program for up to $1.75 billion. The program will focus on
loans for solar energy systems, as well as battery storage, to help
further accelerate the adoption of clean energy in homes across the
United States. Scherzer said, “As a responsible, full-service
digital bank, we will be focused on lending in ways that help
communities and the planet, with the intent of investing over half
of its assets in support of sustainability, local community, and
good health.”
Highlights of the Proposed
Transactions
Merger
- Following
completion of the Merger, taking into account the shares issued in
the Recapitalization, former American Challenger shareholders will
collectively own approximately 13.8% of the combined company, and
existing Patriot shareholders will own approximately 8.2% of the
combined company.
- The implied
total transaction value of the Merger is approximately $119
million. American Challenger common shareholders will receive 4,092
shares of Patriot common stock for each American Challenger common
share they own, and American Challenger preferred shareholders will
receive an amount in cash equal to $75,413.22 per share plus any
accrued and unpaid dividends on the American Challenger preferred
stock.
- Following
closing of the Merger, Patriot will continue to trade under the
ticker PNBK.
- Key members of
American Challenger’s management team and board of directors
(subject to election by Patriot’s stockholders) will join Patriot
upon completion of the Merger. Michael Carrazza, Patriot’s current
Chairman, will remain a director of Patriot following the
Merger.
- Immediately
prior to the completion of the Merger and the Recapitalization,
Patriot will change its jurisdiction of incorporation from
Connecticut to Delaware.
Recapitalization
- As of the date
of this announcement certain investors, including funds associated
with Oaktree Capital Management, L.P. (“Oaktree”)
and Angelo, Gordon & Co., L.P. (“Angelo,
Gordon”), have entered into separate Investment Agreements
with Patriot in connection with the Recapitalization. Patriot will
enter into additional Investment Agreements for the remainder of
the $890 million capital raise with additional investors.
- In the
Recapitalization, Patriot expects to issue approximately:
- $464.5 million of Patriot voting
common stock at $17.69 per share;
- $95.5 million of Patriot
non-voting common stock at $17.69 per share;
- $70 million aggregate liquidation
preference of Patriot preferred stock at $25 per share;
- $180 million aggregate liquidation
preference of Patriot Bank preferred stock at $1,000 per
share;
- Warrants to purchase up to 3.3
million shares of Patriot non-voting common stock; and
- $80 million aggregate principal
amount of ten-year fixed-to-floating rate subordinated notes
eligible for Tier 2 regulatory capital treatment. Of this amount,
it is anticipated that approximately $12 million will be used to
refinance Patriot’s currently outstanding senior notes.
- Following
completion of the Recapitalization, taking into account the shares
issued in the Merger, participating investors will collectively own
approximately 71.8% of Patriot.
- Certain
investors, including Oaktree and Angelo, Gordon, each separately
have the right to nominate a director for election to Patriot’s
board of directors and, subject to approval by Patriot’s
stockholders, will join Patriot’s board of directors upon
completion of the Recapitalization.
Shaking up Banking in Your
Interest
American Challenger is reimagining what it means
to be a bank and has built the infrastructure necessary to deliver
better rates and a truly differentiated customer experience.
American Challenger believes that caring for customers’ money is
caring for them – their values, their beliefs, their families, and
their planet.
“American Challenger was founded to share
digital cost efficiencies with the consumer through better rates
and bring a new banking experience to the segment of the population
who research has shown is looking for a partner to help them
achieve even more, in a simpler, smarter way,” said
Scherzer. “This segment consists of savvy consumers of
banking products and services, spanning generations from
millennials to ‘Gen X;’ from those who have begun to build their
personal wealth, to entrepreneurially-minded people in the prime of
their lives. We are a digital-first bank that puts care into every
moment of customers’ financial futures, from savings accounts that
put their interest first, to mortgages that move at the speed of
their lives.”
Leading-Edge Technology
Platform
American Challenger has been developing its
proprietary technology and data architecture working with its
strategic technology partners Temenos, Mortgage Cadence, Wolters
Kluwer and Wealth Dynamix and its implementation partner Cognizant
to create an efficient platform and differentiated customer
experience.
Strategic Deposit Partners
In addition to the development of American
Challenger’s direct-to-consumer model, American Challenger has
deposit relationships, including with its strategic partners
StoneCastle Partners, LLC, and MaxMyInterest.
Governance Following the Proposed
Transactions
The combined entity will be led by a highly
experienced board of directors, management team and advisory board
who will help guide the organization.
Combined Entity Board of
Directors
Following completion of the Proposed
Transactions, the Patriot and Patriot Bank boards will be
reconstituted and is expected to consist of:
- Felix Scherzer (Chairman), Founder,
Chairman and President of American Challenger, former Global Head
of Financial Institutions M&A at Credit Suisse
- Karl A. Roessner (Lead Independent
Director and Vice Chairman), former Chief Executive Officer of
E*Trade
- Michael Carrazza, (Vice Chairman),
current Chairman of Patriot and Chief Executive Officer of Solaia
Capital Advisors
- Jill Raker, Managing Partner at
Greenbriar Equity Group
- Mark Graf, former Chief Financial
Officer of Discover Financial Services
- Dean C. Graham, CEO of Sector
Financial, former President of CapitalOne Commercial and President
& COO of CapitalSource
- Brian Laibow, Managing Director and
Co-Head of North America for the Opportunities strategy at
Oaktree
- Len Laufer, former Head of
Intelligent Solutions at JPMorgan Chase
- Raymond J. Quinlan, former Chairman
and Chief Executive Officer of Sallie Mae
- Joshua S. Siegel, Chairman and
Chief Executive Officer of StoneCastle Partners
Combined Entity Executive Management
Team
Following completion of the Proposed
Transactions, Patriot's executive management team is expected to
consist of:
- Raymond J. Quinlan, Chief Executive
Officer
- Felix Scherzer, Founder, Chairman
and President
- Andrew Morgan, Co-Founder and Chief
Financial Officer, former CFO of Credit Suisse in the Americas and
Asia
- Michael Carrazza Vice-Chairman
- Betsy Wynnick, Chief Risk Officer,
former Chief Risk Officer of United Bank
- Steve Schlussler, Chief Credit
Officer, former Chief Credit Officer of CapitalSource/Capital
One
- Shane Cameron, Chief Growth
Officer, former Chief Innovation Officer of Omnicom Media
Group
- Shauna Brown, Chief Customer
Experience Officer, former Head of Bank Digital Channels at
USAA
- Eric Chacon, Chief Technology
Officer, former Chief Data Architect of Citigroup’s Consumer
Banking Division
- Bryan Howard, Chief People Officer,
former SVP of HR at Acosta and VP at EverBank, Wells Fargo,
JPMorgan Chase
- Janine Pappas, Chief Auditor,
former Chief Auditor of EverBank and Deputy Chief Auditor of TIAA
Bank
- Doug McDonald, Head of Consumer
Lending, former Head of Mortgage Lending at Credit Suisse Private
Bank and Deutsche Bank Private Bank
- Craig Streem, Head of Investor
Relations, former VP of Investor Relations at Discover Financial
Services
- Dave Barrett, Chief Legal Officer
& Corporate Secretary, former General Counsel of Commercial and
Capital Markets for TIAA Bank/EverBank
- Robert Russell, Patriot Division
Chief Executive Officer, former Chief Operating Officer of
Millington Bank and Chief Executive Officer of NJM Bank
- Joseph Perillo, Patriot Division
Chief Financial Officer, former Chief Financial Officer of
iQor
- Judith Corprew, Patriot Division
Executive Vice President, Chief Compliance, Risk & CRA Officer,
VP Compliance at Fairfield County Bank
- Karen Rojeski, Patriot Division
Executive Vice President & Patriot Division Chief Credit
Officer, former Chief Credit Officer of Metropolitan Commercial
Bank
- Fred Staudmyer, Patriot Division
Executive Vice President & Chief Administrative Officer, former
Chief HR Officer for Ziff Communications & Ziff Davis
Publishing
- Steven Grunblatt, Patriot Division
Executive Vice President & Chief Information Officer, former
Global Director of IT Infrastructure at Cowen & Co.
- David Lowery, Patriot Division
Executive Vice President & Chief Lending Officer, former
lending officer at IBERIABANK, Metropolitan and M&T Bank
Combined Entity Advisory
Board
The advisory board of the combined entity is
expected to consist of:
- Robert Clements, Chief Executive
Officer of Covius and former Chairman & Chief Executive Officer
of EverBank
- Edward Constantino, former director
of Patriot, audit chairman, former partner of KPMG
- Brian Hughes, former Chief Risk
Officer of Discover Financial Services
- Matthew Potere, Chief Executive
Officer of Sunlight Financial
- Emile van den Bol, former director
of Patriot
- Gary E. Zimmerman, Chief Executive
Officer of MaxMyInterest and Six Trees Ventures LLC
Biographical information for the members of the
Board of Directors, Executive Management and Advisory Board and can
be found at:
For Patriot:
https://pnbk.q4ir.com/overview/directors/default.aspx
For American Challenger:
www.americanchallenger.com
Advisors
BofA Securities, Barclays Capital Inc. and
Keefe, Bruyette & Woods, A Stifel Company, are serving as
private placement agents for Patriot in connection with the
Recapitalization. Evercore served as financial advisor and provided
a fairness opinion to Patriot. Blank Rome LLP served as legal
advisor to Patriot. Sullivan & Cromwell LLP served as legal
advisor to American Challenger. Squire Patton Boggs (US) LLP served
as legal counsel to the placement agents.
Cautionary Statement About Forward-Looking
Statements:
This release includes “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 regarding the financial condition, results of
operations, business plans and future performance of Patriot and
American Challenger. Words such as “anticipates," "believes,"
"estimates," "expects," "forecasts," "intends," "plans,"
"projects," “targets,” “designed,” "could," "may," "should," "will"
or other similar words and expressions are intended to identify
these forward-looking statements. These forward-looking statements
are based on Patriot’s and American Challenger’s current
expectations and assumptions regarding Patriot’s and American
Challenger’s businesses, the economy, and other future
conditions.
Because forward-looking statements relate to
future results and occurrences, they are subject to inherent risks,
uncertainties, changes in circumstances and other factors that are
difficult to predict. Many possible events or factors could affect
Patriot’s and/or American Challenger’s future financial results and
performance and could cause the actual results, performance or
achievements of Patriot and American Challenger to differ
materially from any anticipated results expressed or implied by
such forward-looking statements. Such risks and uncertainties
include, among others, (1) the risk that the cost savings, any
revenue synergies and other anticipated benefits of the proposed
transactions may not be realized or may take longer than
anticipated to be realized, including as a result of the impact of,
or problems arising from, the integration of the two companies or
as a result of the condition of the economy and competitive factors
in areas where Patriot does business, (2) disruption to the
parties’ business activities as a result of the announcement and
pendency of the proposed transactions and diversion of management’s
attention from ongoing business activities and opportunities, (3)
the occurrence of any event, change or other circumstances that
could give rise to the right of one or both of the parties to
terminate the Merger Agreement between Patriot and American
Challenger, or the Investment Agreements between Patriot and the
investors in the Recapitalization, (4) the risk that the
integration of Patriot and American Challenger will be materially
delayed or will be more costly or difficult than expected or that
Patriot and American Challenger are otherwise unable to
successfully integrate their companies, (5) the failure to obtain
the necessary approvals of Patriot’s shareholders, (6) the outcome
of any legal proceedings that may be instituted against Patriot
and/or American Challenger, (7) the failure to obtain required
governmental approvals or a delay in obtaining such approvals (and
the risk that such approvals may result in the imposition of
conditions that could adversely affect the combined company or the
expected benefits of the proposed transactions), (8) reputational
risk and potential adverse reactions of Patriot’s and/or American
Challenger’s customers, suppliers, employees or other business
partners, as applicable, including those resulting from the
announcement or completion of the proposed transactions, (9) the
failure of any of the closing conditions in the Merger Agreement or
Investment Agreements to be satisfied on a timely basis or at all,
(10) delays in closing the proposed Merger or Recapitalization,
(11) the possibility that the proposed Merger and Recapitalization
may be more expensive to complete than anticipated, including as a
result of unexpected factors or events, (12) the dilution caused by
Patriot’s issuance of additional shares of its capital stock in
connection with the proposed transactions, (13) general
competitive, economic, political and market conditions, (14) other
factors that may affect future results of Patriot, including
changes in asset quality and credit risk, the inability to sustain
revenue and earnings growth, changes in interest rates and capital
markets, inflation, customer borrowing, repayment, investment and
deposit practices, the impact, extent and timing of technological
changes, capital management activities, and other actions of the
Federal Reserve Board and legislative and regulatory actions and
reforms, and (15) the impact of the ongoing global COVID-19
pandemic on Patriot’s and/or American Challenger’s businesses, the
ability to complete the proposed transactions and/or any of the
other foregoing risks.
Except to the extent required by applicable law
or regulation, each of Patriot and American Challenger disclaims
any obligation to update such factors or to publicly announce the
results of any revisions to any of the forward-looking statements
included in this communication to reflect future events or
developments. Further information regarding Patriot which could
affect the forward-looking statements contained herein can be found
in Patriot’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2020, its subsequent Quarterly Reports on Form 10-Q,
and its other filings with the Securities and Exchange Commission
(“SEC”) and in the proxy statement related to the proposed
transactions.
Additional Information and Where to Find
It
In connection with the proposed Merger and
Recapitalization, Patriot will file a proxy statement and other
relevant documents with the SEC. SHAREHOLDERS ARE ADVISED
TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE AND ANY OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR
SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Shareholders may obtain a free copy of the
proxy statement (when available) and other documents filed by
Patriot at the SEC's Web site at http://www.sec.gov. The proxy
statement and such other documents may also be obtained for free
from Patriot by directing such request to Patriot at 900 Bedford
Street, Stamford, CT, 06901, Attention: Michael Carrazza,
telephone: 203-251-8230.
Participants in
Solicitation
Patriot and its directors, executive officers
and other members of its management and employees may be deemed to
be participants in the solicitation of proxies from its
shareholders in connection with the Merger and Recapitalization. A
list of the names of such directors and executive officers and
information concerning such participants’ ownership of Patriot’s
common stock is set forth in Patriot’s information statements and
Annual Reports on Form 10-K, previously filed with the SEC.
Additional information about the interests of those participants
may be obtained from reading the proxy statement relating to the
Merger and Recapitalization when it becomes available, or by
directing a request to Patriot National Bancorp, Inc., 900 Bedford
Street, Stamford, CT, 06901 Attention: Michael Carrazza, telephone:
203-251-8230.
American Challenger and its directors and
executive officers may also be deemed to be participants in the
solicitation of proxies from Patriot’s shareholders in connection
with the Merger and Recapitalization. A list of the names of such
directors and executive officers and information regarding their
interests in the Merger will be contained in the proxy statement
when available.
About Patriot National Bancorp,
Inc.
Founded in 1994, and now celebrating its 27th
year, Patriot National Bancorp, Inc. is the parent holding company
of Patriot Bank N.A., a nationally chartered bank headquartered in
Stamford, CT. It operates nine branch locations: in Scarsdale, NY;
and Darien, Fairfield, Greenwich, Milford, Norwalk, Orange,
Stamford, Westport, CT with Express Banking locations at
Bridgeport/ Housatonic Community College, downtown New Haven and
Trumbull at Westfield Mall. The Bank also maintains SBA lending
offices in Stamford, Connecticut, Florida, Georgia, Ohio, along
with a Rhode Island operations center. Patriot’s mission is to
serve its local community and nationwide customer base by providing
a growing array of banking solutions to meet the needs of
individuals and small businesses owners. Patriot places great value
in the integrity of its people and how it conducts business. An
emphasis on building strong client relationships and community
involvement are cornerstones of our philosophy as we seek to
maximize shareholder value.
About American Challenger Development
Corp.
American Challenger was formed in January 2020
for purposes of establishing a new digital national bank
headquartered in Stamford, CT and developing best-in-class digital
banking technology and software. More information is available at
americanchallenger.com.
Investor Relations Contacts:
- Patriot: Tom Butler, Butler Associates 646-213-1802;
tbutler@butlerassociates.com
- American Challenger: Craig Streem, Head of Investor Relations
561-235-1810; craig.streem@americanchallenger.com
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