Business Context and Reporting Period
This Form 8-K, dated December 13, 2016, reports that Southern National Bancorp of Virginia, Inc. ("SONA") and Eastern Virginia Bankshares, Inc. ("EVBS") have entered into a definitive Agreement and Plan of Merger. Under the agreement, EVBS will merge with and into SONA, with SONA surviving as the continuing corporation. The transaction was unanimously approved by the Boards of Directors of both companies.
Key Financial Metrics and Transaction Terms
The filing details the terms of the merger rather than historical financial performance metrics such as revenue or cash flow.
- Exchange Ratio: Holders of EVBS common stock will receive 0.6313 shares of SONA common stock for each share held.
- Preferred Stock Treatment: Holders of EVBS Series B Preferred Stock will receive 0.6313 shares of SONA common stock per share, with an option in certain circumstances to receive a new class of non-voting common stock.
- Termination Fee: The agreement includes a termination fee of $7,500,000 payable by either party under specified circumstances.
- Equity Adjustments: Outstanding EVBS stock options will vest and convert to SONA options with adjusted exercise prices. Restricted stock will vest immediately prior to the effective date.
Material Changes and Management Structure
The merger will result in significant changes to the corporate governance and leadership structure of the combined entity:
- Board Composition: The post-merger SONA Board will consist of 11 directors: six current SONA directors and five current EVBS directors, plus one observer designated by EVBS.
- Executive Leadership:
- Georgia S. Derrico (current SONA CEO) will serve as Executive Chairman.
- R. Roderick Porter (current SONA President) will serve as Executive Vice Chairman.
- Joe A. Shearin (current EVBS CEO) will serve as President and Chief Executive Officer.
- Bank Merger: Following the corporate merger, EVBS's subsidiary (EVB) will merge into SONA's subsidiary (Sonabank).
- Executive Compensation: SONA terminated prior change-in-control agreements for key executives (Derrico, Porter, Baker) in exchange for cash severance contingent on the merger closing. New employment agreements were approved with terms ending two years post-merger, including severance provisions for termination without cause.
Guidance, Risks, and Contingencies
The filing contains forward-looking statements regarding the transaction's impact but does not provide specific financial guidance or projections.
- Closing Conditions: Completion is subject to shareholder approval from both companies, regulatory approvals, the effectiveness of SONA's Form S-4 registration statement, and legal opinions confirming tax-free reorganization status under Section 368(a) of the Internal Revenue Code.
- Shareholder Support: Affiliate agreements and voting agreements have been executed with directors, officers, and specific shareholders (Castle Creek Capital Partners IV LP and GCP III EVB LLC) to vote in favor of the merger and against competing proposals.
- Risks: Key risks include the inability to obtain regulatory approvals, delays in closing, changes in asset quality, interest rate fluctuations, and the failure to realize anticipated cost savings or integration benefits.
Investor Verification Checklist
- Verify the approval status of the merger by shareholders of both SONA and EVBS.
- Confirm receipt of necessary regulatory approvals from banking authorities.
- Review the definitive joint proxy statement/prospectus (Form S-4) for detailed financial pro forma information and risk factors.
- Monitor the status of the termination fee conditions and any potential competing acquisition proposals.
- Check for updates on the integration plan and the specific timing of the bank subsidiary merger.