Item 1.01. Entry into a Material Definitive Agreement
On September 20, 2022, Southern Missouri Bancorp, Inc., Poplar Bluff, Missouri (“Southern Missouri” or the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Citizens Bancshares, Co., Kansas City, Missouri (“Citizens”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Citizens will merge with and into the Company, with the Company as the surviving corporation (the “Merger”). Immediately after the effective time of the Merger (the “Effective Time”), the Company intends to merge Citizens Bank and Trust Company, a wholly owned subsidiary of Citizens, with and into Southern Bank, a wholly owned subsidiary of the Company, with Southern Bank as the surviving institution (the “Bank Merger”). The Merger Agreement was approved and adopted by the Board of Directors of each of the Company and Citizens. The Merger is expected to be completed in the first calendar quarter of 2023, subject to customary closing conditions discussed below.
Under the terms of the Merger Agreement, unanimously approved by the boards of both entities and assuming no change in the number of issued and outstanding shares of Citizens common stock, Citizens’ shareholders are projected to receive either a fixed exchange ratio of 1.1448 shares of Southern Missouri common stock or a cash payment of $53.50 for each Citizens’ share, at the election of the shareholders, subject to adjustment based on Citizens’ capital and the total outstanding shares of Citizens at closing. Based on Southern Missouri's $52.53 average closing price over the 20-day trading period ended September 19, 2022, the transaction's value is approximately $140.0 million, with merger consideration comprised of stock and cash at a 75:25 ratio. Upon consummation of the Merger, the shareholders of Citizens will own approximately 18% of the combined company. Prior to the Effective Time, each option to purchase shares of Citizens Common Stock (each, a “Citizens Option”), whether vested or unvested, will be cancelled and converted into the right to receive an amount in cash (subject to withholding as provided in the Merger Agreement) equal to the product of (x) $53.50 minus (y) the exercise price per share of the Citizens Option.
The Merger Agreement contains customary representations and warranties from both the Company and Citizens, and each party has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of its business during the interim period between the execution of the Merger Agreement and the Effective Time, including, in the case of Citizens, specific forbearances with respect to its business activities, (2) the obligation of the Company to call a special meeting of its shareholders to approve the issuance of Company Common Stock in the Merger, (3) the obligation of Citizens to call a special meeting of its shareholders to approve the Merger Agreement (the “Citizens Shareholder Meeting”), and, subject to certain exceptions, to recommend that its shareholders approve the Merger Agreement, and (4) Citizens’ non-solicitation obligations relating to alternative acquisition proposals.
The completion of the Merger is subject to customary conditions, including approval of the Merger Agreement by Citizen’s shareholders, approval of the issuance of the shares in the Merger by Company shareholders and the receipt of required regulatory approvals. The Merger currently is anticipated to be completed in the first quarter of calendar 2023.
The Merger Agreement provides certain termination rights for both Southern Missouri and Citizens and further provides that a fee of $5.5 million will be payable by Citizens upon termination of the Merger Agreement under certain circumstances as specified therein. Certain shareholders including board members and executive officers of Citizens have each executed a voting agreement pursuant to which they have agreed to vote their shares of Citizens’ common stock in favor of the Merger Agreement. Certain directors and executive officers of the Company have each executed a voting agreement pursuant to which they have agreed to vote their shares of Southern Missouri common stock in favor of the issuance of the shares in the Merger.
Pursuant to the Merger Agreement, the Company will appoint as a director one individual who had served as a director of Citizens as of the date of the Merger Agreement for a term to expire at the 2025 annual meeting. The Company has not determined who will be appointed at this time.