Heritage Bank of Commerce entered into an agreement to acquire Presidio Bank (OTCPK:PDOB) (‘Presidio’) for approximately $190 million on May 16, 2019. Under the terms of the agreement, Heritage Commerce Corp. (NasdaqGS:HTBK) (‘Heritage’), parent of Heritage Bank of Commerce will pay $30.18 per Presidio common share as consideration in an all-stock transaction. Presidio shareholders will receive a fixed exchange ratio of 2.47 shares of Heritage common stock in exchange for each share held. Each outstanding and unexercised Presidio option will be assumed by Heritage and converted automatically into an option to purchase shares of Heritage common stock. The number of shares of Heritage common stock subject to each option shall be equal to the number of shares of Presidio common stock that would be issuable upon exercise of such option immediately prior to the closing of the merger multiplied by the exchange ratio. The per share exercise price under each assumed option will be adjusted by dividing the per share exercise price under each assumed option by the exchange ratio, provided that such exercise price will be rounded up to the nearest whole cent. Each award of Presidio restricted shares and all outstanding Presidio restricted stock units (whether or not vested) will be converted into the right to receive shares of Heritage common stock based on the exchange ratio. In connection, Heritage will redeem Presidio’s $10 million of subordinated debt at 103% of par value. As a result of transaction, the holders of Presidio common shares will own approximately 26.5% of Heritage stake at completion. Presidio may be required to pay a fee of $8 million in the event of termination of the transaction under certain circumstances. In the proposed merger, Presidio Bank will merge with and into Heritage Bank of Commerce. At closing, three members of Presidio’s Board will join the Board of Directors of Heritage and its subsidiary Heritage Bank of Commerce, including Steve Heitel, Presidio’s Chief Executive Officer. Clay Jones, President of Presidio, will join Heritage Bank of Commerce as Executive Vice President and President of the Community Business Banking Group. Todd Allen, Executive Vice President, North Bay Market President of Presidio, will join Heritage Bank of Commerce in a similar capacity. The transaction is subject to customary closing conditions, including approvals of state and federal bank regulatory agencies, approvals by shareholders of both Presidio and Heritage, listing approval for consideration shares, receipt of a favorable tax opinion, resignation of each director of Presidio, a 10% limitation to shareholders perfecting their dissenter’s rights and delivery of effective ancillary agreements including voting, support, non-competition, non-solicitation, non-disclosure agreements and effectiveness of Heritage's SEC registration statement on Form S-4. The Boards of Directors of Heritage and Presidio have both approved the transaction. As of July 1, 2019, registration statement became effective. As of July 1, 2019, Heritage and Presidio will held shareholders meeting to approve the transaction. The shareholders meeting of both Presidio and Heritage will be held on August 27, 2019. As of August 20, 2019, Heritage Commerce received the required regulatory approvals from the Federal Reserve and the State of California Department of Business Oversight regarding the merger. As on August 27, the shareholders both the parties have approved the transaction. The deal is expected to close in the fourth quarter of 2019. The acquisition is expected to lead to an EPS accretion of 5% in 2020 and 6.1% in 2021 for Heritage. The purchase is expected to lead to a tangible book value dilution of 8% for Heritage. D.A. Davidson & Co. acted as financial advisor to Heritage. Mark A. Bonenfant, Esq. from Buchalter, a Professional Corporation acted as legal advisor for Heritage. Sandler O'Neill + Partners, L.P. acted as financial advisor to Presidio. Craig D. Miller and Dieu Nguyen from Manatt, Phelps & Phillips LLP acted as legal advisors for Presidio. Advantage Proxy, Inc. acted as information agent to Heritage and will receive a fee of $6,500 for its services. Georgeson LLC acted as information agent to Presidio and will receive a fee of $15,000. Sandler O’Neill will receive a fee equal to 1.6% of the aggregate purchase price, which fee at the time of announcement of the merger was approximately $3.3 million. Sandler O’Neill’s transaction fee is contingent upon consummation of the merger. Sandler O’Neill also received a fee for rendering its opinion, which fairness opinion fee will be credited in full towards the fee which will become due and payable to Sandler O’Neill on the day of closing of the merger. Heritage agreed to pay Davidson a cash fee of $200,000 concurrently with the rendering of its opinion and will also pay to Davidson at the time of closing of the merger a contingent cash fee equal to 0.75% of the aggregate consideration. Heritage Commerce Corp. (NasdaqGS:HTBK) completed the acquisition of Presidio Bank (OTCPK:PDOB) on October 11, 2019.