Patriot National Bancorp, Inc. (NasdaqGM:PNBK) entered into a definitive merger agreement to acquire American Challenger Development Corp. for approximately $120 million on November 14, 2021. Pursuant to the terms of the merger agreement, at the effective time of the merger, American Challenger common stockholders will receive shares of Patriot common stock as consideration and American Challenger preferred stockholders will receive cash. American Challenger common shareholders will receive 4,092 shares of Patriot common stock for each American Challenger common share they own, and American Challenger preferred shareholders will receive an amount in cash equal to $75,413.22 per share plus any accrued and unpaid dividends on the American Challenger preferred stock, resulting in an implied total transaction value of the merger of approximately $119 million. Patriot will acquire American Challenger via a reverse subsidiary merger, with American Challenger surviving as a wholly owned subsidiary of Patriot. Patriot also announced that it had entered into separate definitive agreements with certain investors, consisting of a private placement of approximately $540 million of newly issued Patriot voting and non-voting common stock, warrants for the purchase of non-voting common stock of Patriot, and preferred stock of Patriot Bank, N.A., PatriotÆs wholly owned national bank subsidiary. Patriot intends to raise at least an additional $350 million, for a total capital raise of at least $890 million, and intends to negotiate and enter into definitive agreements with other investors for the purchase of subordinated debt securities and preferred stock of Patriot in addition to further sales of Patriot common stock and warrants for the purchase of Patriot non-voting common stock. Following completion of the merger, taking into account the shares issued in the Recapitalization, former American Challenger shareholders will collectively own approximately 13.8% of the combined company, and existing Patriot shareholders will own approximately 8.2% of the combined company. The participating investors will collectively own approximately 71.8% of Patriot. Following closing of the merger, Patriot will continue to trade under the ticker PNBK. Patriot may be required to pay to American Challenger a termination fee of $4.75 million.
Following the merger, Patriot Bank will adopt the American Challenger business plan and will operate as two divisions û the Patriot Bank Division, which will continue to operate Patriot Bank's existing business, and the American Challenger Division, which will execute the high-growth American Challenger business plan. As soon as practicable following the closing of the Proposed Transactions, Patriot Bank will adopt American ChallengerÆs proprietary technology platform for its operations. PatriotÆs team will remain intact and will be complemented by American ChallengerÆs team and digital platform capabilities. Raymond J. Quinlan, Board Member and Chief Executive Officer of American Challenger, will serve as Chief Executive Officer of the combined entity. Key members of American ChallengerÆs management team and board of directors (subject to election by PatriotÆs stockholders) will join Patriot upon completion of the merger. Michael Carrazza, PatriotÆs current Chairman, will remain a director of Patriot. Following completion of the transaction, the Patriot and Patriot Bank boards will be reconstituted and is expected to consist of Felix Scherzer (Chairman), Karl A. Roessner (Lead Independent Director and Vice Chairman), Michael Carrazza, (Vice Chairman), Jill Raker, Mark Graf, Dean C. Graham, Brian Laibow, Len Laufer, Raymond J. Quinlan, and Joshua S. Siegel. Patriot's executive management team is expected to consist of Raymond J. Quinlan, Chief Executive Officer; Felix Scherzer, Founder, Chairman and President; Andrew Morgan, Co-Founder and Chief Financial Officer; Michael Carrazza Vice-Chairman; Betsy Wynnick, Chief Risk Officer; Steve Schlussler, Chief Credit Officer; Shane Cameron, Chief Growth Officer; Shauna Brown, Chief Customer Experience Officer; Eric Chacon, Chief Technology Officer; Bryan Howard, Chief People Officer; Janine Pappas, Chief Auditor; Doug McDonald, Head of Consumer Lending; Craig Streem, Head of Investor Relations; Dave Barrett, Chief Legal Officer & Corporate Secretary; Robert Russell, Patriot Division Chief Executive Officer; Joseph Perillo, Patriot Division Chief Financial Officer; Judith Corprew, Patriot Division Executive Vice President; Karen Rojeski, Patriot Division Executive Vice President & Patriot Division Chief Credit Officer; Fred Staudmyer, Patriot Division Executive Vice President & Chief Administrative Officer; Steven Grunblatt, Patriot Division Executive Vice President & Chief Information Officer; and David Lowery, Patriot Division Executive Vice President & Chief Lending Officer. The advisory board of the combined entity is expected to consist of Robert Clements, Edward Constantino, Brian Hughes, Matthew Potere, Emile van den Bol, and Gary E. Zimmerman. Immediately prior to the completion of the merger and the Recapitalization, Patriot will change its jurisdiction of incorporation from Connecticut to Delaware.
The transaction is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals, approval by anti-trust regulations and approval by Patriot's shareholders. The transaction has been approved by the boards of directors of Patriot and American Challenger and are expected to close in the first quarter of 2022. On June 30, 2022, the Office of the Comptroller of the Currency conditionally approved the Merger Agreement, The OCC approval will automatically terminate if the Transaction is not consummated within six months of June 30, 2022.
BofA Securities, Barclays Capital Inc. and Keefe, Bruyette & Woods, A Stifel Company, are serving as private placement agents for Patriot in connection with the Recapitalization. Evercore served as financial advisor and provided a fairness opinion to Patriot. Blank Rome LLP served as legal advisor to Patriot. Sullivan & Cromwell LLP served as legal advisor to American Challenger. Squire Patton Boggs (US) LLP served as legal counsel to the placement agents. Debevoise & Plimpton LLP is advising Oaktree Capital Management, L.P. as a lead investor in the $890 million recapitalization of Patriot National Bancorp, Inc. Sebastian Tiller and Jonathan Mitnick, Marisa Stavenas and Lesley Peng, Adam Cohen, Benjamin Rippeon, and Peter Guryan and Kelly Karapetyan of Simpson Thacher acted as legal advisors to Angelo, Gordon & Co., L.P.
Patriot National Bancorp, Inc. (NasdaqGM:PNBK) cancelled the acquisition of American Challenger Development Corp. on July 18, 2022. The parties have mutually determined that not all closing conditions of the Merger Agreement can be satisfied under the current structure and agreement. Although the parties remain in active discussions regarding a modified transaction, it is uncertain whether a new agreement can be reached. Accordingly, it was by mutual agreement of the companies and was unanimously approved by the Boards of Directors of each company to terminate the existing Merger Agreement. Pursuant to the parties' mutual termination and release agreement, the parties have agreed to release each other from any claims relating to or arising out of the Merger Agreement or the transactions contemplated thereby.