The privately held parent company of Nicolet National Bank, Nicolet Bankshares Inc., has announced that it will acquire the publicly traded Mid-Wisconsin Financial Services, the parent company of Mid-Wisconsin Bank. This merger will extend Nicolet’s control over Northern Wisconsin with a more diversified loan portfolio and will create the sixth-largest holding company headquartered in Wisconsin.
Mike Daniels, the president of Nicolet National Bank, revealed that Nicolet needed to grow to overcome the approaching regulatory burdens from the Dodd-Frank Wall Street Reform and Consumer Protection Act. The acquisition of smaller community banks is one of several ways they can achieve growth. In fact, Nicolet also acquired four branches of Anchor Banks’ at Green Bay in 2010. This deal, according to Daniels, was just the right opportunity to take when Robert Atwell, the CEO of Mid-Wisconsin Financial Services, approached them about a possible merger due to struggles brought about by the credit crisis and recession.
Mid-Wisconsin was issued an enforcement action by the Federal Reserve to clean up their loans and increase capital. They still owe $10.5 million in TARP loans that will be repaid when the deal closes. According to Atwell, Mid-Wisconsin may have financial problems but they can still be proud of their established, valuable community relationships and the good people that make up their company. They are situated in small towns and are already familiar with managing business in Wisconsin. Because of this, they have a favorable and a diversified customer base with a loan portfolio that is more concerned with agricultural rather than industrial or commercial which Nicolet mainly provides. Following the news of their merger, Mid-Wisconsin’s shares increased by 37 percent. Shareholders will receive 0.37 stock for every Mid-Wisconsin stock they are holding while those holding only a few stocks will receive money instead.
This merger will be finalized in the second quarter of next year with Kim Gowey and Chris Ghidorzi joining Nicolet’s Board of Directors. Scot Thompson, the president of Mid-Wisconsin, will stay with the company.
Relating the article to our previous discussions on acquisitions, it is clear that there is a business combination through the purchase method where assets and liabilities are recorded at fair value. The acquirer is Nicolet and the acquired company is Mid-Wisconsin. If goodwill is recorded on the books of Mid-Wisconsin, it will not be carried over to the parent’s book. Instead, they will recognize the new goodwill should there be any excess of the acquisition cost over the fair value of Mid-Wisconsin’s net assets. There is clearly a direct acquisition of Mid-Wisconsin’s assets and liabilities by Nicolet. In relation to that, the article actually highlighted Mid-Wisconsin’s TARP loans which will be repaid by Nicolet next year.
We also learned that in acquisitions, the companies involved could have business operations that are in some ways related to each other. The merger between Nicolet and Mid-Wisconsin is an example of a horizontal combination. From the article, we learn that the companies involved are both in the banking industry. The only difference mentioned is that Nicolet loan portfolio primarily caters to the commercial and industrial sector while the acquired Mid-Wisconsin is more concerned with the agricultural sector. In effect, the merger actually resulted to a more diversified line of business for Nicolet. The merger will start the consolidation of Mid-Wisconsin’s financial statements to that of Nicolet.
Reference:
Ryman, R. (December 12, 2012). Nicolet Bankshares to accquire Mid-Wisconsin Bank parent. Retrieved from [http://www.wausaudailyherald.com/article/20121130/CWS03/311300322/Nicolet-Bankshares-acquire-Mid-Wisconsin-Bank-parent]
