Heritage Financial, Washington Banking To Merge In $265 Mln. Deal

(RTTNews) - Heritage Financial Corp. (HFWA) Wednesday agreed to merge with Washington Banking Co. (WBCO) in a deal valued at about $265.1 million.The deal creates one of the premier community banking franchises in Western Washington and the Pacific Northwest, the companies said.

As per the terms of the merger, Washington Banking shareholders will receive 0.89000 shares of Heritage common stock and $2.75 in cash for each share of Washington Banking common stock.

Based on the closing price of Heritage common stock of $15.89 on October 23, 2013, the consideration value per share for Washington Banking was $16.89, or about $265.1 million in aggregate.

Upon consummation, the shareholders of Washington Banking will own about 46% of the combined company and the shareholders of Heritage will own the remainder.

The merger is expected to be significantly accretive to the combined company's earnings per share in 2014 and thereafter, excluding one-time deal related expenses.

Further, it is anticipated that the combined company's capital ratios will be well in excess of regulatory minimums and its tangible common equity ratio will be in excess of 9%.

Based on financial results as of September 30, 2013, the combined company will have about $3.3 billion in assets, $2.9 billion in deposits and $2.3 billion in loans with 73 branch locations across Washington and Oregon.

The leadership team of the combined company will be comprised of executives from both organizations. Brian Vance will serve as Chief Executive Officer with Jeff Deuel, Dave Spurling and Don Hinson from Heritage along with Bryan McDonald, Ed Eng, and Lynn Garrison from Washington Banking. Jack Wagner, current Chief Executive Officer of Washington Banking, will serve as a special advisor to the combined company.

Tony Pickering, current chairman of Washington Banking will become Chairman of the combined company at closing with Brian Charneski from Heritage serving as Vice Chairman. Additionally, the Board of Directors will be comprised of eight directors from Heritage and seven directors from Washington Banking.

Washington Banking branches will adopt the Heritage Bank name in all markets, with the exception of six branches in Whidbey Island markets which will continue to operate using the Whidbey Island Bank name. The corporate headquarters of the combined company will be in Olympia, Washington.

The deal has been unanimously approved by the boards of Heritage and Washington Banking. The merger is subject to regulatory approvals, approval by Heritage and Washington Banking shareholders, and certain other customary closing conditions and is expected to close in the first half of 2014.