FIRST INTERSTATE BANCSYSTEM, INC. (NASDAQ:FIBK) Files An 8-K Other Events
Item8.01
| Other Events |
Settlement of Certain Litigation Relating to the
Merger
On May17, 2017, solely to avoid the costs, risks and
uncertainties inherent in litigation and to allow each of First
Interstate BancSystem, Inc.s (First Interstate) and Cascade
Bancorps (Cascade) shareholders to vote on the proposals required
in connection with the proposed merger between First Interstate
and Cascade, Cascade entered into a memorandum of understanding
with plaintiffs and other named defendants, including First
Interstate, regarding the settlement of the lawsuits captioned
Sternheim Family Trust v. Cascade Bancorp, Inc., et
al., pending in the Circuit Court, Deschutes County, Oregon
(the Circuit Court) under File No.17CV06744 (the Sternheim
Action), and Parshall v. Cascade Bancorp et al., pending
in the United States District Court for the District of Oregon
under File No.6:17-cv-00405-JR (the Parshall Action), as well as
the settlement of all related claims that were or could have been
asserted in other actions.
As described in greater detail in the joint proxy
statement/prospectus (the Joint Proxy Statement) filed by First
Interstate and Cascade with the Securities and Exchange
Commission (the SEC) on April13, 2017, Cascade, its directors and
First Interstate were named as defendants in three putative class
action lawsuits: the Sternheim Action, the Parshall Action and a
third action, captioned Crosse v. Cascade Bancorp, et
al., filed in the Circuit Court, Multnomah County, Oregon,
under File No.17CV08305, which has since been dismissed
voluntarily. The complaint in the Sternheim Action alleges that
the directors of Cascade breached their fiduciary duties in
connection with their approval of the Agreement and Plan of
Merger, dated November17, 2016, by and among Cascade and First
Interstate (the Merger Agreement) by, among other things:
agreeing to an allegedly unfair price for Cascade; approving the
transaction notwithstanding alleged conflicts of interest;
agreeing to deal protection devices that plaintiffs allege are
unreasonable; and by failing to disclose certain facts about the
process that led to the merger and financial analyses performed
by Cascades financial advisor. The complaint in the Sternheim
Action also alleges that First Interstate aided and abetted those
alleged fiduciary breaches. The complaint in the Parshall Action
alleges that Cascade and its directors violated Section14(a) of
the Securities Exchange Act of 1934, as amended (the Exchange
Act), by failing to disclose certain facts about the process that
led to the merger and financial analyses performed by Cascades
financial advisor. The complaint in the Parshall Action further
alleges that First Interstate and Cascades board of directors
violated Section20(a) of the Exchange Act. Each of the actions
seek, among other things, an order enjoining completion of the
merger. Other potential plaintiffs may also file additional
lawsuits challenging the merger.
Under the terms of the memorandum of understanding, Cascade, the
other named defendants, including First Interstate, and the
plaintiffs in the Sternheim and Parshall Actions have agreed to
settle both actions and all related claims subject to approval of
the Circuit Court. If the Circuit Court approves the settlement
contemplated in the memorandum of understanding, the claims will
be released and the Sternheim and Parshall Actions will be
dismissed with prejudice. The plaintiffs have also agreed to the
complete, irrevocable release of Piper Jaffray
and its directors, officers, employees and controlling persons
from all liabilities and claims in connection with the merger of
Cascade and First Interstate. to the terms of the memorandum of
understanding, Cascade has agreed to make available additional
information to its shareholders in advance of the special meeting
of shareholders of Cascade scheduled for May24, 2017, in Bend,
Oregon, to vote upon, among other things, the proposal to approve
and adopt the Merger Agreement. First Interstate is also making
available the additional information to its shareholders in
advance of the annual meeting of shareholders of First Interstate
scheduled for May24, 2017, in Billings, Montana, to vote upon,
among other things, the proposal to approve and adopt the Merger
Agreement. The additional information is set forth below and
should be read in conjunction with the Joint Proxy Statement. In
return, the plaintiffs have agreed to dismissal of the Sternheim
and Parshall Actions and to withdraw all motions filed in
connection with such lawsuits. In connection with the settlement,
plaintiffs in the Sternheim and Parshall Actions intend to seek
an award of attorneys fees and expenses, subject to approval of
the Circuit Court. Cascade has agreed to negotiate in good faith
with the plaintiffs to determine the amount of the legal fees and
expenses of plaintiffs counsel, which is ultimately to be
determined by the Circuit Court. If the settlement is finally
approved by the Circuit Court, it is anticipated that the
settlement will resolve and release all claims in all actions
that were or could have been brought challenging any aspect of
the merger, the Merger Agreement or any disclosure made in
connection therewith. There can be no assurance that the parties
will ultimately enter into a stipulation of settlement or that
the Circuit Court will approve the settlement even if the parties
were to enter into such stipulation. In such event, the proposed
settlement as contemplated by the memorandum of understanding may
be terminated. The details of the settlement will be set forth in
a notice to be sent to Cascades shareholders prior to a hearing
before the Circuit Court to consider both the settlement and
plaintiffs application to the court for attorneys fees and
expenses.
The settlement will not affect the merger consideration to be
paid to shareholders of Cascade in connection with the merger
between Cascade and First Interstate or the timing of the special
meeting of Cascades shareholders or the timing of the annual
meeting of First Interstates shareholders mentioned above.
Cascade and the other defendants, including First Interstate,
have vigorously denied, and continue vigorously to deny, that
they have committed or aided and abetted in the commission of any
violation of law or engaged in any of the wrongful acts that were
or could have been alleged in the consolidated lawsuit, and
expressly maintain that, to the extent applicable, they
diligently and scrupulously complied with their fiduciary and
other legal duties and are entering into the contemplated
settlement solely to eliminate the burden and expense of further
litigation, to put the claims that were or could have been
asserted to rest, and to avoid any possible delay to the closing
of the merger that might arise from further litigation. Nothing
in this document, the memorandum of understanding or any
stipulation of settlement shall be deemed an admission of the
legal necessity or materiality under any applicable laws of any
of the disclosures set forth herein.
SUPPLEMENT TO JOINT PROXY STATEMENT/PROSPECTUS
The following information supplements the Joint Proxy Statement
and should be read in connection with the Joint Proxy Statement,
which should be read in its entirety. To the extent that
information herein differs from or updates information contained
in the Joint Proxy Statement, the information contained herein
supersedes the information contained in the Joint Proxy
Statement. All page references in the information below are to
pages in the Joint Proxy Statement, and terms used below have the
meanings set forth in the Joint Proxy Statement, unless otherwise
defined below. All assumptions, qualifications and limitations
contained in the Joint Proxy Statement with respect to the
opinion of Cascades financial advisor, Piper Jaffray, including
those in the Piper Jaffray opinion, are hereby incorporated by
reference and should be reviewed in connection with this
supplement. Without admitting in any way that the disclosures
below are material or otherwise required by law, Cascade and
First Interstate make the following supplemental disclosures:
Opinion of Cascades Financial Advisor
The disclosure under the heading DESCRIPTION OF THE
MERGEROpinion of Cascades Financial AdvisorSelected Companies
Analysis is hereby supplemented by amending and restating the
last full table on pg. 71 of the Joint Proxy Statement as
follows:
| Cascade | Cascade Group Minimum | Cascade Group th Percentile | Cascade Group Median | Cascade Group Mean |
Cascade Group 90th Percentile |
Cascade Group Maximum | ||||||||||||||||||||||
|
Stock Price / Tangible Book Value per Share |
195.8 | % | 119.8 | % | 147.5 | % | 184.5 | % | 194.6 | % | 234.5 | % | 356.7 | % | ||||||||||||||
|
Stock Price / Last Twelve Months EPS |
29.4x | 10.2x | 16.5x | 18.7x | 18.7x | 21.6x | 26.1x | |||||||||||||||||||||
|
Stock Price / 2016 Est. EPS |
29.8x | 9.3x | 16.4x | 17.7x | 18.3x | 21.8x | 26.3x | |||||||||||||||||||||
|
Stock Price / 2017 Est. EPS |
17.0x | 9.5x | 13.0x | 16.3x | 16.6x | 21.2x | 26.5x | |||||||||||||||||||||
|
Stock Price / 2018 Est. EPS |
16.0x | 8.5x | 11.2x | 14.8x | 15.2x | 18.8x | 26.8x | |||||||||||||||||||||
|
Premium / Core Deposits |
9.8 | % | 3.0 | % | 5.7 | % | 10.5 | % | 11.2 | % | 17.3 | % | 24.6 | % |
The disclosure under the heading DESCRIPTION OF THE
MERGEROpinion of Cascades Financial AdvisorSelected Companies
Analysis is hereby supplemented by amending and restating the
first full table on pg. 73 of the Joint Proxy Statement as
follows:
| First Interstate | First Interstate Group Minimum | First Interstate Group th Percentile | First Interstate Group Median | First Interstate Group Mean | First Interstate Group th Percentile | First Interstate Group Maximum | ||||||||||||||||||||||
|
Stock Price / Tangible Book Value per Share |
225.0 | % | 113.6 | % | 147.8 | % | 183.7 | % | 199.3 | % | 257.0 | % | 356.7 | % | ||||||||||||||
|
Stock Price / Last Twelve Months EPS |
18.2x | 8.4x | 16.9x | 19.0x | 18.7x | 22.4x | 26.1x | |||||||||||||||||||||
|
Stock Price / 2016 Est. EPS |
17.7x | 8.0x | 16.3x | 18.5x | 18.1x | 21.6x | 26.3x | |||||||||||||||||||||
|
Stock Price / 2017 Est. EPS |
16.5x | 7.7x | 11.9x | 16.5x | 16.5x | 19.8x | 26.5x | |||||||||||||||||||||
|
Stock Price / 2018 Est. EPS |
15.5x | 7.0x | 9.6x | 15.8x | 15.5x | 18.8x | 26.8x | |||||||||||||||||||||
|
Premium / Core Deposits |
14.0 | % | (2.7 | %) | 4.8 | % | 14.7 | % | 13.4 | % | 22.6 | % | 24.6 | % |
The disclosure under the heading DESCRIPTION OF THE
MERGEROpinion of Cascades Financial AdvisorComparable Transaction
Analysis is hereby supplemented by amending and restating the
last full table on pg. 74 of the Joint Proxy Statement as
follows:
| First Interstate/ Cascade Merger | Comparable Transactions Minimum | Comparable Transactions th Percentile | Comparable Transactions Median | Comparable Transactions Mean | Comparable Transactions th Percentile | Comparable Transactions Maximum | ||||||||||||||||||||||
|
Book Value |
157.3 | % | 126.3 | % | 127.3 | % | 172.4 | % | 167.2 | % | 201.2 | % | 218.8 | % | ||||||||||||||
|
Tangible Book Value |
214.1 | % | 131.1 | % | 146.2 | % | 187.9 | % | 182.5 | % | 224.0 | % | 231.7 | % | ||||||||||||||
|
Core Deposit Premium |
11.6 | % | 5.2 | % | 6.6 | % | 9.6 | % | 11.9 | % | 19.3 | % | 22.9 | % | ||||||||||||||
|
LTM Earnings Per Share |
32.2x | 2.1x | 14.9x | 21.0x | 20.5x | 27.2x | 37.5x | |||||||||||||||||||||
|
Current Year Earnings Per Share |
32.6x | 13.1x | 15.6x | 19.5x | 19.6x | 23.3x | 32.0x | |||||||||||||||||||||
|
Next Year Earnings Per Share |
18.6x | 11.8x | 12.5x | 16.6x | 18.4x | 26.2x | 34.9x | |||||||||||||||||||||
|
One-Day Market Premium |
9.3 | % | 0.7 | % | 1.7 | % | 10.4 | % | 19.5 | % | 42.8 | % | 61.9 | % |
The disclosure under the heading DESCRIPTION OF THE
MERGEROpinion of Cascades Financial AdvisorDiscounted Cash Flow
Analysis is hereby supplemented by adding the following
description at the end of the first paragraph on pg. 75 of the
Joint Proxy Statement:
In its analysis, Piper Jaffray used a five-year discount dividend
model, which is a valuation methodology that adds cash flows from
estimated dividends expected to be paid to shareholders through a
specified forecast period, in this case, December31, 2021, to the
terminal value of the entity. To approximate the terminal value
of Cascade common stock at December31, 2022, Piper Jaffray
applied a range of various price to earnings multiples to
estimated 2022 earnings. The estimated current value of this sum
is obtained by discounting this sum to its net present value
using a range of selected discount rates. In considering the
five-year discount dividend model, Piper Jaffray determined a
range of terminal multiples applied to 2022 earnings based on
management projections and estimates, with the range of terminal
values derived from the Cascade Peer Groups forward price to
earnings multiples and the perpetuity method. Earnings estimates
were based on Cascade management estimates through 2020, with
2021 and 2022 based on a long term growth rate of 6%. Piper
Jaffray used an 8% tangible common equity to tangible asset ratio
for Cascade in its future period estimates, with any capital in
excess of this amount paid as dividends. Cascade management
approved the foregoing approach.
The disclosure under the heading DESCRIPTION OF THE
MERGEROpinion of Cascades Financial AdvisorDiscounted Cash Flow
Analysis is hereby supplemented by amending and restating the
second full paragraph on pg. 75 of the Joint Proxy Statement as
follows:
To approximate the range of terminal values of Cascade common
stock at December31, 2022, Piper Jaffray applied price to
earnings multiples ranging from 11.0x to 15.0x. The terminal
values were then discounted to present values using discount
rates ranging from 9.0% to 13.0% when applied to 2022 earnings
multiples, which were selected to reflect different assumptions
regarding potential desired rates of return of holders or
prospective buyers of Cascade common stock. The range of
projected terminal values at December31, 2022, is illustrated in
the following table:
|
Rangeof Terminal Values at 12/31/22 |
Discount Rate | ||||||||||||||||||||||
| 9.0 | % | 10.0 | % | 11.0 | % | 12.0 | % | 13.0 | % | ||||||||||||||
| 11.0x | $ | 5.41 | $ | 5.20 | $ | 4.99 | $ | 4.80 | $ | 4.62 | |||||||||||||
| 12.0x | $ | 5.78 | $ | 5.55 | $ | 5.33 | $ | 5.12 | $ | 4.92 | |||||||||||||
| 13.0x | $ | 6.16 | $ | 5.91 | $ | 5.67 | $ | 5.45 | $ | 5.23 | |||||||||||||
| 14.0x | $ | 6.53 | $ | 6.26 | $ | 6.01 | $ | 5.77 | $ | 5.54 | |||||||||||||
| 15.0x | $ | 6.90 | $ | 6.62 | $ | 6.35 | $ | 6.09 | $ | 5.85 |
As illustrated in the following table, the analysis indicates an
imputed range of values per share of Cascade common stock of
$4.62 to $6.90 when applying these earnings multiples.
The disclosure under the heading DESCRIPTION OF THE
MERGEROpinion of Cascades Financial AdvisorDiscounted Cash Flow
Analysis is hereby supplemented by amending and restating the
first full paragraph on pg. 76 of the Joint Proxy Statement as
follows:
Piper Jaffray also performed a five-year dividend discount
analysis using cash flows from estimated dividends expected to be
paid to shareholders to estimate the range of net present values
per share of First Interstate ClassA common stock, assuming that
First Interstate performed in accordance with publicly available
I/B/E/S consensus mean analyst earnings estimates through
December31, 2020. First Interstates 2021 and 2022 earnings were
estimated using the I/B/E/S consensus net income long term growth
rate of 9%. To approximate the terminal value of First Interstate
common stock at December31, 2022, Piper Jaffray applied ranges of
various price to earnings multiples to First Interstates
estimated 2022 earnings, with the range derived from the First
Interstate Peer Groups forward price to earnings multiples and
the perpetuity method. Piper Jaffray assumed an 8% tangible
common equity to tangible asset ratio for First Interstate in its
future period estimates, with any capital in excess of this
amount paid as dividends. Cascade management approved this
approach.
To approximate the terminal value of First Interstate ClassA
common stock at December31, 2022, Piper Jaffray applied price to
earnings multiples ranging from 11.0x to 16.0x. The terminal
values were then discounted to present values using different
discount rates ranging from 9.0% to 13.0% when applied to 2022
earnings, which were chosen to reflect different assumptions
regarding required rates of return holders or prospective buyers
of First Interstate ClassA common stock. The range of projected
terminal values at December31, 2022, is illustrated in the
following table:
|
Terminal Value at 12/31/22 |
Discount Rate | ||||||||||||||||||||||
| 9.0 | % | 10.0 | % | 11.0 | % | 12.0 | % | 13.0 | % | ||||||||||||||
| 11.0x | $ | 32.85 | $ | 31.54 | $ | 30.30 | $ | 29.12 | $ | 28.00 | |||||||||||||
| 12.0x | $ | 35.12 | $ | 33.70 | $ | 32.36 | $ | 31.09 | $ | 29.89 | |||||||||||||
| 13.0x | $ | 37.38 | $ | 35.86 | $ | 34.43 | $ | 33.06 | $ | 31.77 | |||||||||||||
| 14.0x | $ | 39.65 | $ | 38.03 | $ | 36.49 | $ | 35.03 | $ | 33.65 | |||||||||||||
| 15.0x | $ | 41.92 | $ | 40.19 | $ | 38.55 | $ | 37.01 | $ | 35.54 | |||||||||||||
| 16.0x | $ | 44.18 | $ | 42.35 | $ | 40.62 | $ | 38.98 | $ | 37.42 |
As illustrated in the following table, the analysis indicates an
imputed range of values per share of First Interstate ClassA
common stock of $28.00 to $44.18 when applying these earnings
multiples.
Forward-Looking Statements
This Current Report on Form 8-K contains statements regarding the
proposed merger between Cascade and First Interstate, the
expected timetable for completing the transaction, future
financial and operating results, benefits and synergies of the
proposed transaction and other statements about the future
expectations, beliefs, goals, plans or prospects of the
management of each of Cascade and First Interstate. These
statements constitute forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995. Words such as expects, believes, estimates, anticipates,
targets, goals, projects, intends, plans, seeks, indicates and
variations of such words and similar expressions are intended to
identify such forward-looking statements which are not statements
of historical fact. These forward-looking statements are not
guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to assess.
Actual outcomes and results may differ materially from what is
expressed or forecasted in such forward-looking statements. The
closing of the proposed merger is subject to the approval of the
shareholders of Cascade and First Interstate and other customary
closing conditions. There is no assurance that such conditions
will be met or that the proposed merger will be consummated. If
the merger is completed, factors that may cause actual outcomes
to differ from what is expressed or forecasted in these
forward-looking statements include, among things: difficulties
and delays in integrating Cascade and First Interstate and
achieving anticipated synergies, cost savings and other benefits
from the transaction; higher than anticipated transaction costs;
deposit attrition, operating costs, customer loss and business
disruption following the merger, including difficulties in
maintaining relationships with employees, may be greater than
expected; competitive pressures among depository and other
financial institutions may increase significantly and have an
effect on revenues; the strength of the U.S. economy in general,
and of the local economies in which the surviving corporation
will operate, may be different than expected, which could result
in, among other things, a deterioration in credit quality or a
reduced demand for credit and have a negative effect on the
combined corporations loan portfolio and allowance for loan
losses; changes in the U.S. legal and regulatory framework; and
adverse conditions in the stock market, the public debt market
and other capital markets (including changes in interest rate
conditions), which would negatively affect the surviving
corporations business and operating results. For a more complete
list and description of such risks and uncertainties, refer to
Cascades Annual Report on Form 10-K for the year ended
December31, 2016, First Interstates Annual Report on Form 10-K
for the year ended December31, 2016, as well as other filings
made by Cascade and First Interstate with
the SEC. Except as required under the U.S. federal securities
laws and the rules and regulations of the SEC, Cascade and First
Interstate disclaim any intention or obligation to update any
forward-looking statements, whether as a result of new
information, future events, developments, changes in assumptions
or otherwise.
Additional Information and Where to Find It
This communication is being made in respect of the proposed
merger between First Interstate and Cascade. In connection with
the proposed merger, First Interstate has filed with the SEC a
Registration Statement on Form S-4, which the SEC declared
effective on April7, 2017, and which includes the Joint Proxy
Statement. Cascade filed the Joint Proxy Statement with the SEC
on April13, 2017. First Interstate and Cascade have also
delivered the Joint Proxy Statement to their respective
shareholders seeking the required shareholder approvals.
First Interstate and Cascade urge investors and security
holders to read the above-referenced Registration Statement on
Form S-4 (including the Joint Proxy Statement) regarding the
proposed merger, as well as other documents filed with the SEC,
because they contain important information about the proposed
merger. You may obtain copies of all documents filed
with the SEC regarding this transaction, free of charge, at the
SECs website (www.sec.gov). You may also obtain these documents,
free of charge, from: (i)Cascades website (www.botc.com) under
the heading About Us and then under the heading Investor
Relations and then under the heading Investor Information and
then under the tab SEC Filings; (ii)Cascade upon written request
to Cascade Bancorp, Attn: Investor Relations, 1100 North West
Wall Street, P.O. Box 369, Bend, Oregon 97701; or (iii)First
Interstates website (www.fibk.com).
Participants in Solicitation
Cascade, First Interstate and their respective directors,
executive officers, management and employees may be deemed to be
participants in the solicitation of proxies in respect of the
merger. Information concerning Cascades participants is set forth
in Cascades Annual Report on Form 10-K for the year ended
December31, 2016, as filed with the SEC on March3, 2017, and the
Joint Proxy Statement. Information concerning First Interstates
participants is set forth in First Interstates Annual Report on
Form 10-K for the year ended December31, 2016, as filed with the
SEC on March2, 2017, and the Joint Proxy Statement. Additional
information about Cascades directors and executive officers and
First Interstates directors and executive officers can also be
found in the Joint Proxy Statement. Investors should read the
Joint Proxy Statement carefully before making any voting or
investment decisions. You can obtain free copies of these
documents from First Interstate and Cascade using the contact
information above.
About FIRST INTERSTATE BANCSYSTEM, INC. (NASDAQ:FIBK)
First Interstate BancSystem, Inc. is a financial and bank holding company. The Company, through its bank subsidiary First Interstate Bank (the Bank), delivers a range of banking products and services to individuals, businesses, municipalities and other entities. The Company operates through community banking segment. Its community banking segment provides customers with commercial and consumer banking products and services in its market areas through community service activities. The Company also offers Internet and mobile banking services. In addition to its primary emphasis on commercial and consumer banking services, the Company also offers trust, employee benefit, investment and insurance services through its bank subsidiary. It operates approximately 80 banking offices, including detached drive up facilities, in over 40 communities located in Montana, Wyoming and western South Dakota. FIRST INTERSTATE BANCSYSTEM, INC. (NASDAQ:FIBK) Recent Trading Information
FIRST INTERSTATE BANCSYSTEM, INC. (NASDAQ:FIBK) closed its last trading session down -1.75 at 35.85 with 185,589 shares trading hands.