A Merger To Keep An Eye On

Summary

• First Mid-Illinois Bancshares is merging with First Clover Leaf for either $12.87 in cash or 0.495 shares in common stock of First Mid-Illinois (25% in cash, 75% in fractional shares).
• I believe the deal will go through given the director approval, consolidating industry, and price action of the two companies.
• Currently the deal is not very attractive with a -0.92-4.63% spread.
• However, the companies have a lack of liquidity and the spread has real potential or widening going forward.
• I am keeping an eye on the deal, but not making a bet at the current price.

I have always enjoyed short-term actionable investing ideas. I am not sure why, there is just something about making that quick short-term gain that gets the endorphins in your brain fired up. One of my favorite actionable ideas in this past year was ArPetrol; a liquidation play that yielded my readers, between 20-40% in a quick month or so. Since then I have been on the lookout for more short-term, actionable ideas.

Recently I stumbled upon a merger between First Mid-Illinois Bancshares (NASDAQ:FMBH) and First Clover Leaf (NASDAQ:FCLF). I originally profiled the merger in this article, but did not go into any details on the deal.

Before we jump into the details and risks of the merger, investors should read this well written article by Maudes Capital, profiling the merger on May 5 th, 2016. Maudes Capital did a great job highlighting the merger and how investors can take advantage of it.

I also suggest that interested investors read both financial filings from each company…

FMBH S-4

FCLF 425

I believe that this deal is still relevant and further analysis into the merger will not only be beneficial to existing followers, but new followers as well.

The Deal

Source: FMBH S-4

On April, 26th, FCLF entered into a merger agreement with FMBH, where FMBH will acquire 100% of the outstanding shares of FCLF. Thus, FCLF will merge into FMBH and FMBH will be the surviving entity. Each share of FCLF will be converted into or become the right to receive either $12.87 in cash or 0.495 shares of FMBH common stock. The deal is anticipated to be complete in the second half of 2016.

Currently there is a -0.92-4.63% spread; the fractional shares getting the -0.92% spread and the cash payout of $12.87 getting a 4.63% spread. The deal is set so that 25% of the FCLF shares will

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.