South Financial Group to buy MountainBank Financial for 1.98 times revenue

Weekly Corporate Growth Report, May 26, 2003

The Deal: The South Financial Group Inc. has signed a definitive agreement to acquire Mountainbank Financial Corporation in a stock transaction. Under the terms of the agreement, Mountainbank shareholders will receive about $32.50 per share in South Financial stock. For the purposes of the acquisition, South Financial's shares will be valued based on the 10-trading-day average immediately subsequent to receiving Federal Reserve consent for the transaction. At $25 or higher, South Financial will issue 1.3 shares for each Mountainbank share. At $21 or less, it will issue 1.548 shares for each Mountainbank share. Either company may terminate the merger if the 10-day-trading average is greater than $29 or less than $17. The deal is expected to close in October, subject to regulatory and shareholder approvals.

Discussion: MountainBank Financial Corporation is the holding company for MountainBank. The bank operates 18 branch offices in North Carolina. The bank's operations are primarily retail oriented and directed toward individuals and small- and medium-sized businesses located in its banking markets.

The South Financial Group is the holding company for Carolina First Bank and Mercantile Bank (formerly Citrus Bank). Carolina First has branches in both North and South Carolina. Mercantile has operations in the Orlando, Tampa, and Jacksonville, Florida metropolitan areas.