Wunderlich Boosts Home Bancshares Target To $37 After 'Accretive Acquisition'

In a report published Friday, Wunderlich analyst John Kevin Reynolds maintained a Hold rating on

, while raising the price target from $35 to $37, to reflect an accretive acquisition in Tampa. Home Bancshares is acquiring Tampa, FL-based, Florida Business BancGroup, Inc. and its subsidiary Bay Cities Bank, with $540 million in assets. "Although small, this deal is strategic, in our view, as it boosts HOMB into the #13 position in market share in the Tampa MSA on a pro forma basis," analyst Kevin Reynolds mentioned. Although the deal is expected to be immediately accretive to Home Bancshares' EPS and TBV per share, the company's current stock valuation already reflects some benefits of this transaction. The transaction is expected to close in late 3Q15 or early 4Q15, subject to shareholder and regulatory approvals. In the report Wunderlich noted, "The deal value of approximately $102 million (80% stock/20% cash) approximates 1.9x TBV for Bay Cities' parent, a reasonable price from the perspective of HOMB shareholders and in line with recent M&A multiples for Florida-based banks HQ'd in major metro markets such as Tampa and Orlando." Analyst John Kevin Reynolds expects the company's M&A activity to come under pressure in the near term due to stiffening competition and rising M&A pricing.