Prosperity Bancshares, Inc. (NYSE:PB) (‘Prosperity') signed a definitive merger agreement to acquire LegacyTexas Financial Group, Inc. (NasdaqGS:LTXB) (‘LegacyTexas') for $2 billion on June 16, 2019. As per the terms, each share of common stock of LegacyTexas will be converted automatically into the right to receive 0.5280 shares of common stock of Prosperity and $6.28 in cash, without interest. This results in an 85% stock and 15% cash trade. In lieu of the issuance of any fractional shares, Prosperity shall pay to each former holder of Legacy shares an amount of cash. The transaction values LegacyTexas's shares at $41.78 per share. Each of the restricted stock awards and performance share awards of LegacyTexas will receive 0.5280 shares of common stock of Prosperity and $6.28 in cash and options of LegacyTexas will receive cash equivalent as consideration. Pro-forma ownership in the combined entity would be 73% by Prosperity shareholders and 23% by LegacyTexas shareholders. Upon completion, the separate corporate existence of LegacyTexas shall cease and it will be merged with Prosperity which will be the resulting corporation. Prosperity will effect the merger of LegacyTexas Bank (a wholly-owned subsidiary of LegacyTexas) with and into Prosperity Bank (a wholly owned subsidiary of Prosperity) with Prosperity Bank continuing as the surviving bank. A termination fee of $82 million will be payable by LegacyTexas upon termination of the merger agreement. The Board of Directors of the holding company will increase to 14 by adding 3 members of LegacyTexas to the Prosperity board.

Concurrently with the agreement, Prosperity Bank entered into employment agreements with certain executives of LegacyTexas, including, among others, Kevin J. Hanigan (LegacyTexas's President and Chief Executive Officer), J. Mays Davenport (LegacyTexas's Executive Vice President and Chief Financial Officer), Charles D. Eikenberg, LegacyTexas' Executive Vice President, Community Banking, Scott A. Almy, LegacyTexas' Executive Vice President, Chief Operating Officer, Chief Risk Officer and General Counsel and Thomas S. Swiley, LegacyTexas' Executive Vice President and Chief Lending Officer. Kevin J. Hanigan, Bruce W. Hunt and George A. Fisk will be appointed to the Board of Directors of Prosperity Bank, subject to each nominee (other than Kevin Hanigan) qualifying as an independent Director of Prosperity. Additionally, J. Mays Davenport will be appointed to the Board of Directors of Prosperity Bank. Kevin J. Hanigan will join the Prosperity team as the President and Chief Operating Officer of Prosperity and President of Prosperity Bank. J. Mays Davenport will be named Executive Vice President and Director of Corporate Strategy of Prosperity and Prosperity Bank. Charles D. Eikenberg will serve as Prosperity Bank's Executive Vice President, Community Banking, Scott A. Almy will serve as Prosperity Bank's Executive Vice President, Operations, and Thomas S. Swiley will serve as Prosperity Bank's Executive Vice President, Lending. David Zalman, who currently serves as Chairman and Chief Executive Officer of Prosperity and Senior Chairman and Chief Executive Officer of Prosperity Bank, will serve as Senior Chairman of Prosperity upon completion and will continue to serve as Senior Chairman of Prosperity Bank and Chief Executive Officer of Prosperity and Prosperity Bank. H.E. Timanus, Jr., who currently serves as Vice Chairman of Prosperity and Chairman and Chief Operating Officer of Prosperity Bank, will serve as Chairman of Prosperity and will continue to serve as Chairman and Chief Operating Officer of Prosperity Bank. Edward Z. Safady, who currently serves as President of Prosperity and Vice Chairman of Prosperity Bank, will serve as Vice Chairman of Prosperity and will continue to serve as Vice Chairman of Prosperity Bank. The existing principal place of business of Prosperity immediately preceding the merger shall be the principal place of business of the resulting corporation after the merger. Following completion of the merger, the common stock of LegacyTexas will cease to be listed on the NASDAQ and will be deregistered under the Securities Exchange Act of 1934, as amended.

The completion of the merger is subject to various customary conditions, including, among others the approval of by LegacyTexas's stockholders, approval by Prosperity's shareholders, the issuance of shares of Prosperity common stock to the LegacyTexas's stockholders, receipt of all required regulatory approvals from, among others, the Federal Deposit Insurance Corporation, the Texas Department of Banking, and the Federal Reserve System (provided that such approvals do not impose a materially burdensome condition on Prosperity or LegacyTexas), effectiveness of the registration statement for the shares of Prosperity common stock to be issued to LegacyTexas stockholders and approval of the listing of such shares on the New York Stock Exchange, the employment agreements not having been terminated, the absence of any material adverse change with respect to LegacyTexas and its subsidiaries, the absence of laws or judgments, whether preliminary, temporary or permanent, which may prevent, make illegal or prohibit the completion of the merger and subject to certain materiality exceptions, the accuracy of the representations and warranties made by LegacyTexas and Prosperity, respectively, and compliance in all material respects by LegacyTexas and Prosperity with their respective obligations. The merger has been unanimously approved and recommended by the Board of Directors of Prosperity and unanimously approved and recommended by the independent Directors of LegacyTexas. As of August 13, 2019, Federal Reserve Bank of Dallas approved the transaction. As of October 8, 2019, Prosperity Bancshares has received all regulatory approvals necessary to complete the transaction. As of October 28, 2019, LegacyTexas shareholders approved the deal. The acquisition is expected to close when all of the conditions are fulfilled or waived and is expected during the fourth quarter of 2019, although delays could occur. As of October 8, 2019, transaction is expected to be effective as of November 1, 2019. The transaction is expected to be 2020 earnings per share accretive to Prosperity Bancshares of approximately 10.3% assuming fully phased-in cost savings.

Stephen Gunlock, Thomas Michaid, Craig McMahen, Ashwin Kakani and Tom Michaud of Keefe, Bruyette, & Woods, Inc. acted as fairness opinion provider and William S. Anderson, Jason Jean, Joshua T. McNulty, Rebecca L. Baker, Scott C. Sanders, Michele J. Alexander, Aaron P. Roffwarg, Timothy A. Wilkins and Bryan S. Dumesnil of Bracewell LLP acted as legal advisors to Prosperity. J.P. Morgan Securities LLC acted as financial advisor and fairness opinion provider, and Christian Otteson, Bo Anderson and Kurt Leeper of Shapiro Bieging Barber Otteson LLP acted as legal advisor to LegacyTexas. Lee Meyerson, Sebastian Tiller and Justine Chiu of Simpson Thacher represented J.P. Morgan Securities LLC in the transaction. Keefe, Bruyette, & Woods, Inc. acted as financial advisor for Prosperity Bancshares. Alliance Advisors LLC acted as proxy solicitor for Prosperity Bancshares and LegacyTexas Financial. Prosperity Bancshares and LegacyTexas will pay a minimum fee of $7,500 to Alliance Advisors. For financial advisory services rendered in connection with the merger, Legacy has agreed to pay J.P. Morgan an estimated fee of approximately $20 million, of which $2 million became payable at the time Legacy and Prosperity entered into the reorganization agreement and J.P. Morgan delivered its opinion. Prosperity has agreed to pay Keefe, Bruyette, & Woods, Inc. (KBW) a total cash fee of $4 million, $0.1 million of which became payable upon the execution of KBW's engagement agreement with Prosperity, $0.5 million of which became payable with the rendering of KBW's opinion.

Prosperity Bancshares, Inc. (NYSE:PB) completed the acquisition of LegacyTexas Financial Group, Inc. (NasdaqGS:LTXB) on November 1, 2019. LegacyTexas Bank was merged into Prosperity Bank and LegacyTexas' business will operate as Prosperity Bank dba LegacyTexas Bank until systems conversion, scheduled for early June 2020. Upon conversion, the combined bank will operate as Prosperity Bank. All the appointments to the Board and management of Prosperity Bank were done as required.