FIRST INTERSTATE BANCSYSTEM, INC. Item 8.01. Other Events. As previously announced, onSeptember 15, 2021 ,First Interstate BancSystem, Inc. , aMontana corporation ("First Interstate") entered into an Agreement and Plan of Merger (as amended from time to time, the "Merger Agreement") with Great Western Bancorp, Inc., aDelaware corporation ("Great Western"). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Great Western will merge with and into First Interstate (the "Merger"), with First Interstate continuing as the surviving corporation in the Merger. The Merger Agreement was unanimously approved by the board of directors of each of First Interstate and Great Western. In connection with the Merger, First Interstate filed with theU.S. Securities and Exchange Commission (the "SEC") a registration statement on Form S-4 containing a joint proxy statement/prospectus, as amended, and each of First Interstate and Great Western filed a definitive joint proxy statement/prospectus with theSEC datedDecember 16, 2021 (the "Proxy Statement"), which First Interstate and Great Western first mailed to their stockholders and shareholders, respectively, on or aboutDecember 16, 2021 . Following the announcement of the Merger Agreement, as of the date of this Current Report on Form 8-K, a complaint (the "Complaint"), captioned Laidlaw v. Borrecco et al., No. 49CIV21-003213, was filed by a purported stockholder of Great Western in theCircuit Court of the2nd Judicial District ,Minnehaha County, South Dakota . In addition, Great Western received demand letters from counsel representing individual stockholders of Great Western (the "Demand Letters" and, together with the Complaint, the "Matters"). The Matters allege, among other things, that the defendants caused a materially incomplete and misleading Proxy Statement relating to the Merger to be filed with theSEC in violation of certain state securities laws, Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended and Rule 14a-9 promulgated thereunder, and/or in breach of their fiduciary obligations under state law. First Interstate and Great Western believe the claims asserted in the Matters are without merit and supplemental disclosures are not required or necessary under applicable laws. However, in order to avoid the risk that the Matters delay or otherwise adversely affect the Merger, and to minimize the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, First Interstate and Great Western have agreed to supplement the Proxy Statement as described in this Current Report on Form 8-K. First Interstate, Great Western and the other named defendants deny that they have violated any laws or breached any duties to First Interstate's shareholders or Great Western's stockholders, as applicable. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, First Interstate and Great Western specifically deny all allegations in the Matters that any additional disclosure was or is required. The additional disclosures in this Current Report on Form 8-K supplement the disclosures contained in the Proxy Statement and should be read in conjunction with the Proxy Statement, which should be read in its entirety. To the extent that information herein differs from or updates information contained in the Proxy Statement, the information contained herein supersedes the information contained in the Proxy Statement. All page references are to pages in the Proxy Statement, and defined terms used but not defined herein have the meanings
set forth in the Proxy Statement.
1. The risk factor entitled "Holders of Great Western common stock will have a
reduced ownership and voting interest in the surviving corporation after the
merger and will exercise less influence over management" on page 41 of the
Proxy Statement under the heading "Risk Factors" is amended and restated as
follows:
Holders of First Interstate Class A common stock and Great Western common stock
currently have the right to vote in the election of the board of directors and
on other matters affecting First Interstate and Great Western, respectively.
When the merger is completed, each holder of Great Western common stock who
receives shares of First Interstate Class A common stock will become a holder of
common stock of the surviving corporation, with a percentage ownership of the
surviving corporation that is smaller than the holder's percentage ownership of
Great Western. Based on the number of shares of First Interstate common stock
and Great Western common stock outstanding as of the close of business on the
respective record dates, and based on the number of shares of First Interstate
Class A common stock expected to be issued in the merger, the former holders of
Great Western common stock, as a group, are estimated to own approximately
forty-three percent (43%) of the fully diluted shares of the surviving
corporation immediately after the merger and current holders of First Interstate
common stock as a group are estimated to own approximately fifty-seven percent
(57%) of the fully diluted shares of the surviving corporation immediately after
the merger (such percentage is inclusive of approximately eighteen and one-half
percent (18.5%) of the fully diluted shares of the surviving corporation
immediately after the merger that the Scott Family shareholders are estimated to
own following the merger and the contemplated conversion of First Interstate
Class B common stock into First Interstate Class A common stock). Because of
this, holders of Great Western common stock may have less influence on the
management and policies of the surviving corporation than they now have on the
management and policies of Great Western.
2. The second full paragraph on page 64 of the Proxy Statement under the heading
"The Merger-Background of the Merger" is amended and restated as follows:
OnMay 5, 2021 , Great Western and First Interstate entered into a mutual nondisclosure agreement in order to facilitate further discussions, and in early May, Messrs. Borrecco and Riley had exploratory conversations in which they discussed, at a high level, their respective businesses, organizational structures and performance. Also in May, Great Western entered into a mutual nondisclosure agreement withCompany A , andMr. Borrecco and the Chief Executive Officer ofCompany A had exploratory conversations in which they discussed, at a high level, their respective businesses, organizational structures and performance. The nondisclosure agreements with First Interstate andCompany A contain customary obligations to preserve the confidentiality of information provided by each party and do not include "don't ask, don't waive" provisions. The nondisclosure agreement withCompany A includes a customary mutual standstill provision that, for a period of eighteen months, prohibits both Great Western andCompany A from, among other things, making a proposal to acquire or engage in a merger or business combination with the other party without the other party's prior written consent. At no point in the course of the negotiations during this period relating to the merger did Great Western enter into a confidentiality, standstill or similar agreement with any other potential counterparty related to a potential strategic business combination transaction other thanCompany A and First Interstate.
3. The second full paragraph on page 70 of the Proxy Statement under the heading
"The Merger-Background of the Merger" is amended and restated as follows:
OnAugust 29, 2021 , the Great Western board held a special meeting, which members of Great Western management and representatives ofWachtell Lipton and Piper Sandler also attended. At the meeting,Mr. Brannen updated the Great Western board, based on his discussions withMr. Jahnke , regarding the proposed stockholders' agreement terms under discussion between First Interstate and the Scott Family shareholders and the proposed governance of the surviving corporation, including, in the event definitive transaction terms were agreed, the possibility of having a member of the Great Western board serve as a member of the Executive Committee of the surviving corporation. Members of Great Western management then updated the Great Western directors on the status of the mutual due diligence process that was nearing completion, including the results of Great Western management's reverse due diligence review of First Interstate, with the assistance of Great Western's advisors. A representative ofWachtell Lipton also reviewed with the directors their fiduciary duties in connection with the potential transaction, as he had previously done, and reviewed with the directors First Interstate's existing corporate governance structure. In addition, a representative of Piper Sandler reviewed with the Great Western board movements in the relative market prices of both Great Western and First Interstate shares since the execution of theJuly 30 IOI, and discussed with the Great Western board the substantial increase in the implied premium to Great Western's stockholders that would result from those price movements based on the exchange ratio reflected in theJuly 30 IOI. Following discussion, the Great Western board expressed its support for the parties to continue due diligence and negotiation of definitive transaction terms.
4. The fourth full paragraph on page 71 of the Proxy Statement under the heading
"The Merger-Background of the Merger" is amended and restated as follows:
OnSeptember 13, 2021 , the Great Western board held a special meeting, which members of Great Western management and representatives ofWachtell Lipton and Piper Sandler also attended. At the meeting, Great Western management provided an update on the completion of the parties' mutual due diligence review and the proposed terms of the potential transaction, including the proposed final exchange ratio of 0.8425 shares of First Interstate Class A common stock per share of Great Western common stock. A representative of Piper Sandler reviewed Piper Sandler's financial analyses of the proposed transaction with First Interstate and reviewed with the Great Western board Great Western management's current forecasts reflected in Great Western's stand-alone plan. A representative ofWachtell Lipton then reviewed with the Great Western board the terms of the draft merger agreement, including the proposed charter and bylaw amendments of First Interstate provided for in the merger agreement, as well as the terms of the other transaction documents that were anticipated to be entered into in connection with the transaction, including the support agreement among the Scott Family shareholders and the stockholders' agreement among First Interstate and the Scott Family shareholders, and reviewed with the independent directors the preliminary draft term sheet that First Interstate had provided toMr. Borrecco for discussion purposes regarding his appointment as Chief Banking Officer of the combined company and Piper Sandler's relationship disclosures regarding the financial advice and services provided by Piper Sandler to Great Western and First Interstate during the past two years. During the meeting, the Great Western board engaged in further discussions regarding the benefits of the proposed transaction with First Interstate relative to Great Western's available alternatives, including its stand-alone plan and the risks and uncertainties associated with the stand-alone plan in the current environment. Following discussion, the Great Western board unanimously expressed the view that the proposed transaction with First Interstate offered greater benefits to Great Western and its stockholders, with reduced risks, as compared to Great Western's available alternatives, and unanimously authorized Great Western management to move forward with negotiating the transaction on the terms described to the Great Western board and to seek to finalize negotiations with First Interstate as promptly as practicable.
5. The table entitled "Great Western Comparable Company Analysis" on page 81 of
the Proxy Statement under the heading "The Merger-Opinion of Great Western's
Financial Advisor-Comparable Company Analyses" is amended and restated as
follows:
Great Great Great Great
Western Western Western Western
Independent Heartland Hilltop First International First First First Enterprise Peer
Peer Peer Peer
Bk Group Financial Holdings Financial Bancshares Merchants Busey Financial BancFirst Financial Group Group Group Group
Company Great Western Inc. USA Inc. Inc. Bancorp. Corp. Corp. Corp. Bankshares Corp. Services Median Mean Low High
Market Cap.
($mm) 1,548 2,820 1,948 2,552 2,126 2,525 2,098 1,276 6,157 1,782 1,665 2,112 2,495 1,276 6,157
Price / TBV
(%) 134 192 136 117 168 126 161 133 442 185 161 161 182 117 442
Price / LTM
EPS (x) 9.6 11.9 9.6 5.5 11.6 10.8 11.3 9.9 27.7 12.3 11.1 11.2 12.2 5.5 27.7
Price / 2021E
EPS (x) 8.1 12.4 9.1 7.9 10.5 - 10.3 10.0 28.2 10.8 9.8 10.3 12.1 7.9 28.2
Price / 2022E
EPS (x) 10.0 13.2 9.8 12.6 12.6 - 11.1 11.2 30.2 15.8 10.5 12.6 14.1 9.8 30.2
Current
Dividend Yield
(%) 0.7 2.1 2.2 1.5 4.1 3.0 3.0 4.1 1.4 2.6 1.8 2.4 2.6 1.4 4.1
Total Assets
($mm) 13,070 18,448 18,371 17,665 16,038 15,311 14,923 12,415 12,329 11,015 10,347 15,117 14,686 10,347 18,448
Loans /
Deposits (%) 73.5 82.8 64.1 65.2 76.1 62.2 74.7 69.5 54.2 63.6 83.6 67.3 69.6 54.2 83.6
Non-performing
Assets
("NPAs")(1) /
Total Assets
(%) 2.01 0.29 0.44 0.51 0.62 0.55 0.39 0.27 0.24 0.67 0.42 0.43 0.44 0.24 0.67
Loan Loss
Reserves /
Loans (%) 3.19 1.24 1.20 1.09 1.67 1.47 2.19 1.32 1.16 1.35 1.77 1.34 1.45 1.09 2.19
Net
Charge-offs /
Average Loans
(%) 0.25 0.13 0.12 0.02 0.23 0.07 0.06 0.06 (0.02) 0.27 0.05 0.06 0.10 (0.02) 0.27
Tangible
Common Equity
("TCE") /
Tangible
Assets ("TA")
(%) 8.85 8.45 8.08 12.57 8.46 13.33 9.04 8.00 11.68 8.87 8.32 8.67 9.68 8.00 13.33
Total
Risk-Based
Capital
("RBC") Ratio
(%) 15.96 14.23 15.04 23.48 15.31 21.75 14.23 16.41 21.12 17.35 14.95 15.86 17.39 14.23 23.48
Most Recent
Quarter
("MRQ") Return
on Average
Assets
("ROAA") (%) 1.80(2) 1.27 1.35 2.29 1.26 2.45 1.51 1.04 1.88 1.78 1.49 1.50 1.63 1.04 2.45
MRQ Return on
Average
Tangible
Common Equity
("ROATCE") (%) 21.28(2) 16.68 18.01 18.76 16.71 18.81 17.82 13.14 16.53 20.75 18.88 17.92 17.61 13.14 20.75
MRQ Net
Interest
Margin ("NIM")
(%) 3.22 3.16 3.37 2.63 3.30 2.66 3.22 2.49 3.35 3.31 3.45 3.26 3.09 2.49 3.45
MRQ Cost of
Deposits (%) 0.12 0.31 0.10 0.21 0.12 0.13 0.19 0.14 0.06 0.08 0.12 0.13 0.15 0.06 0.31
MRQ Efficiency
Ratio (%) 50.9 51.2 58.2 76.5 56.3 34.7 48.9 59.5 45.6 54.4 49.3 52.8 53.5 34.7 76.5
(1) NPAs / Assets = (Nonaccrual Loans + Troubled Debt Restructurings ("TDR") +
Other Real Estate Owned ("OREO")) / Total Assets
(2) Presented on a GAAP basis; adjusted profitability metrics for
including adjusting the
assumed 21% tax rate are as follows: Adjusted profitability metrics for the
quarter ended June 30, 2021 : Adj. ROAA = 1.36%; Adj. ROATCE = 16.13%
6. The table entitled "First Interstate Comparable Company Analysis" on page 82
of the Proxy Statement under the heading "The Merger-Opinion of Great
Western's Financial Advisor-Comparable Company Analyses" is amended and
restated as follows:
Columbia First First First First
Associated Commerce Umpqua Pacific Glacier Washington Independent Heartland Banking Hilltop
First CVB International Interstate Interstate Interstate Interstate
First PacWest Banc- Bancshares Holdings Premier Bancorp Federal Bk Group Financial System Holdings
Financial Financial Bancshares Peer Group Peer Group Peer Group Peer Group Company
Interstate Bancorp Corp Inc. Corp.
Bancorp Inc. Inc. Inc.
7,757
Price / TBV (%) 205 188 118 232 155 193 266 139 192 136 154 117 139 168 190 126 155 168 117
266
Price / LTM EPS (x) 13.8 9.9 11.4 14.3 8.5 11.9 15.0 15.2 11.9 9.6 11.2 5.5 10.3 11.6 12.1 10.8 11.4 11.3 5.5
15.2
Price / 2021E EPS (x) 13.9 8.7 10.8 16.5 10.1 11.3 17.5 14.2 12.4 9.1 12.3 7.9 10.1 10.5 12.5
- 11.1 11.7 7.9 17.5
Price / 2022E EPS (x) 14.5 9.9 13.2 19.8 11.0 13.3 17.7 13.0 13.2 9.8 12.8 12.6 12.7 12.6 13.2
- 12.9 13.2 9.8 19.8
Current Dividend
Yield (%) 3.9 2.4 3.9 1.6 4.4 3.5 2.6 2.8 2.1 2.2 3.4 1.5 3.2 4.1 3.8 3.0 3.0 3.0 1.5 4.4Total Assets ($mm) 18,941 34,868 34,153 33,856 30,285 20,529 20,488 19,650 18,448 18,371 18,013 17,665 16,182 16,038 15,539 15,311 18,448 21,960 15,311
34,868 Loans / Deposits (%) 63.2 65.8 87.8 56.9 84.7 79.9 67.0 89.5 82.8 64.1 63.2 65.2 70.8 76.1 63.7 62.2 67.0 72.0 56.9 89.5 NPAs(1)/ Total Assets (%) 0.18 0.25 0.62 0.36 0.11 0.17 0.40 0.58 0.29 0.44 0.18 0.51 0.22 0.62 0.11 0.55 0.36 0.36 0.11 0.62 Loan Loss Reserves / Loans (%) 1.37 1.16 1.32 1.10 1.24 1.71 1.34 1.25 1.24 1.20 1.47 1.09 1.52 1.67 0.86 1.47 1.25 1.31 0.86 1.71 Net Charge-offs / Average Loans (%) 0.04 (0.11) 0.08 0.02 0.24 0.03 (0.03) (0.03) 0.13 0.12 (0.01) 0.02 (0.00) 0.23 0.02 0.07 0.02 0.05 (0.11) 0.24 TCE / TA (%) 6.99 7.80 8.04 9.91 9.09 9.38 8.98 8.37 8.45 8.08 8.97 12.57 8.09 8.46 9.17 13.33 8.97 9.25 7.80 13.33 Total RBC Ratio (%) 13.89 14.99 14.02 15.07 15.41 15.61 14.45 14.09 14.23 15.04 14.47 23.48 14.62 15.31 15.94 21.75 15.04 15.90 14.02 23.48 MRQ ROAA (%) 0.91 2.10 1.06 1.97 1.54 1.90 1.55 0.97 1.27 1.35 1.25 2.29 1.36 1.26 1.35 2.45 1.36 1.58 0.97 2.45 MRQ ROATCE (%) 14.26 28.58 13.32 19.77 17.44 22.31 17.85 10.53 16.68 18.01 14.82 18.76 17.90 16.71 15.54 18.81 17.85 17.80 10.53 28.58 MRQ NIM (%) 2.81 3.39 2.37 2.59 3.20 3.43 3.43 2.82 3.16 3.37 3.15 2.63 3.51 3.30 3.03 2.66 3.16 3.07 2.37 3.51 MRQ Cost of Deposits (%) 0.06 0.10 0.07 0.04 0.11
0.08 0.07 0.24 0.31 0.10 0.04 0.21 0.09 0.12 0.05 0.13 0.10 0.12 0.04
0.31
MRQ Efficiency Ratio (%) 62.4 47.9 67.0 56.8 58.7 49.6 49.3 58.8 51.2 58.2 54.4 76.5 59.6 56.3 38.9 34.7 56.3 54.5 34.7 76.5
(1) NPAs / Assets = (Nonaccrual Loans + TDR + OREO) / Total Assets
7. The last table on page 83 of the Proxy Statement under the heading "The
Merger-Opinion of Great Western's Financial Advisor-Analysis of Precedent
Transactions" is amended and restated as follows:
Nationwide Precedent Transactions
SVB
Old WSFS Financial
Citizens National New York Webster Eastern Financial Group / Bridge
First Financial Bancorp Community Independent Financial Bankshares, Corporation Boston Bancorp /
Interstate Group / / First Bancorp / BankCorp. Corporation BancorpSouth Inc. / / Bryn Mawr Private Dime
/ Great Investors Midwest Flagstar / Meridian / Sterling Bank / Cadence Century Bank Financial Community
Western(1) Bancorp Bancorp Bancorp Bancorp Bancorp Bancorporation Bancorp Corporation Holdings Bancshares Median Mean Low HighTransaction Price / LTM Earn. (x) 12.0 14.4 18.5 4.0 15.1 16.8 9.6 15.2 30.5 22.7 16.1 15.7 16.3 4.0 30.5 Transaction Price / NTM Earn. (x) 12.6 (2) 11.7 14.5 6.6 15.3 13.8 12.6 - 17.8 27.1 13.0 13.8 14.7 6.6 27.1 Transaction Price / TBV Per Share (%) 169 137 165 116 150 193 158 175 234 121 97 154 155 97 234 TBV Premium Core Deposits. (%)(3) 7.2 5.0 5.9 1.8 7.5 10.5 6.6 4.3 12.9 1.9 (0.6) 5.5 5.6 (0.6) 12.9 1-Day Market Prem. (%) 26.0 12.3 3.2 6.1 22.1 11.5 5.1 20.8 14.2 29.5 7.8 11.9 13.3 3.2 29.5 Announce Date 9/16/2021 7/28/2021 6/1/2021 4/26/2021 4/22/2021 4/19/2021 4/12/2021 4/7/2021 3/10/2021 1/4/2021 7/1/2020 - - - -
(1) Transaction metrics based on closing prices as ofSeptember 14, 2021
(2) Based on mean
(3) Core Deposits used in the Core Deposit Premium calculation defined as total
deposits less time deposits with balances greater than $250,000 8. The first paragraph on page 84 of the Proxy Statement under the heading "The
Merger-Opinion of Great Western's Financial Advisor-Net Present Value
Analyses" is amended and restated as follows:
Piper Sandler performed an analysis that estimated the net present value of a share of Great Western common stock assuming Great Western performed in accordance with certain internal financial projections for Great Western for the years endingSeptember 30, 2021 throughSeptember 30, 2024 , which assumed that a special dividend is paid in the terminal period (i.e., the year endedSeptember 30, 2024 ) in order to bring Great Western's terminal period TCE / TA ratio in line with theGreat Western Peer Group median. The projected dividends used in the analyses for the years endingSeptember 30, 2021 throughSeptember 30, 2024 were:$0.12 ;$0.50 ;$0.84 and$7.87 per share annually, respectively. To approximate the terminal value of a share of Great Western common stock atSeptember 30, 2024 , Piper Sandler applied price to year endedSeptember 30, 2024 earnings multiples ranging from 10.0x to 14.0x and multiples of year endedSeptember 30, 2024 tangible book value ranging from 130% to 170%. Piper Sandler selected these price to earnings and tangible book value multiples based on Piper Sandler's review of, among other matters, the trading multiples of selected companies that Piper Sandler deemed to be comparable to Great Western. The terminal values were then discounted to present values using different discount rates ranging from 9.5% to 13.5%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Great Western common stock. As illustrated in the following tables, the analysis indicated an imputed range of values per share of Great Western common stock of$23.50 to$34.07 when applying multiples of earnings and$24.74 to$34.11 when applying multiples of tangible book value.
9. The sentence immediately above the third table on page 84 of the Proxy
Statement under the heading "The Merger-Opinion of Great Western's Financial
Advisor-Net Present Value Analyses" is deleted and replaced in its entirety
with the following:
Piper Sandler also considered and discussed with the Great Western board of
directors how this analysis would be affected by changes in the underlying
assumptions, including variations with respect to earnings. To illustrate this
impact, Piper Sandler performed a similar analysis, assuming Great Western's
earnings varied from 20% above projections to 20% below projections. This
analysis resulted in the following range of per share values for Great Western
common stock, applying the price to fiscal year 2024 earnings multiples range of
10.0x to 14.0x referred to above and a discount rate of 11.71%.
Earnings Per Share Multiples
Annual Estimate
Variance 10.0x 11.0x 12.0x 13.0x 14.0x
(20.0%) $21.09 $22.54 $23.99 $25.44 $26.89
(10.0%) $22.90 $24.53 $26.16 $27.79 $29.42
0.0% $24.71 $26.52 $28.34 $30.15 $31.96
10.0% $26.52 $28.52 $30.51 $32.50 $34.49
20.0% $28.34 $30.51 $32.68 $34.86 $37.03
Piper Sandler also performed an analysis that estimated the net present value
per share of First Interstate common stock, assuming First Interstate performed
in accordance with publicly available mean analyst earnings per share and
. . .
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