Prosperity to Buy LegacyTexas for $2.1 billion

United States: On Monday, a U.S regional bank Prosperity said it would buy it peer LegacyTexas for $2.1 billion. The deal will create the second largest bank by a deposit in the U.S

LegacyTexas shareholders will get 0.528 Prosperity shares and $6.28 in cash for each share held. This represents a deal value of $41.78 per share, a premium of 9.3% based on the closing price of LegacyTexas.

The deal will strengthen Prosperity’s position in the North Texas cities and all around the area of Dallas-Fort Worth.

As of March 31, 2019, LegacyTexas reported assets worth $9 billion. $8.1 billion in assets and $7.1 billion in deposits. Prosperity’s assets were $22.35 billion and $17.2 billion in deposits.

U.S. President Donald Trump lowered corporate taxes and eased financial regulations on regional banks. Since then, deal-making in the banking sector has been on the rise.

Mergers & Acquisition activity in the sector had weakened after the financial crisis in 2007-2009. Stricter rules had been imposed on lenders with $50 billion in assets or more. Regulators also barred banks with compliance issues from expanding.

But a cut in corporate taxes in December 2017 and easing of stringent capital requirements in the following year have freed up capital, reviving deal-making in the banking sector.

Earlier this year, U.S. regional lender BB&T Corp (NYSE: BBT) bought rival SunTrust Banks (NYSE: STI) for about $28 billion in stock, marking the first big bank merger since the 2007-2009 crisis.

Wall Street analysts are optimistic towards more consolidations in the sector, especially between super-regional banks.

Prosperity- LegacyTexas deal is expected to close in the fourth quarter.

Kevin Hanigan, chief executive of LegacyTexas, will join Prosperity as its chief operating officer, the companies said.

Keefe, Bruyette & Woods were deal advisers for Prosperity, while J.P. Morgan Securities LLC acted for LegacyTexas.

Huawei says U.S. ban was hurting more than expected, to wipe $30 billion off revenue

Hit from the U.S ban and slashed tax for the year has hit China’s Huawei more than it expected, said Ren Zhengfei the company’s founder and CEO.

Zhengfei’s downbeat assessment that the ban will hit revenue by $30 billion was the first time Huawei has assessed the impact of the U.S. action. It comes as a surprise after weeks of defiant comments from company executives. They maintained that Huawei was technologically self-sufficient.

The U.S has put Huawei on an export blacklist citing national security issues. The U.S requires its suppliers to stop selling to Huawei without special approval.

The firm has denied U.S allegations that its products pose a security threat.

The ban has forced companies, including Alphabet (NASDAQ: GOOGL) Inc’s Google and British chip designer ARM to limit or give up their relationships with the Chinese company.

Huawei had not expected that the U.S. resolves to “crack” it would be “so strong and so pervasive,” Ren said while speaking at the company’s Shenzhen headquarters on Monday.

Two U.S. tech experts, Nicholas Negroponte, and George Gilder, also took part in this session.

“We did not expect they would attack us on so many aspects,” reported Zhengfei, adding he expects a revival of the business in 2021.

“We cannot get components supply, cannot participate in many international organizations, cannot work closely with many universities, cannot use anything with U.S. components, and cannot even establish a connection with networks that use such components.”

Huawei’s revenue was 721.2 billion yuan ($104 billion) in 2018. It expects an income of $100 billion in 2019 and 2020, said Zhengfei. This is against initial target growth in 2019 to range between $125 – $130 billion depending on the forex fluctuations.