The disclosure in the last paragraph on page 75 of the Joint Proxy Statement/Prospectus under the heading "Opinion of Capital Bank Financial's Financial Advisor" is hereby amended and restated to read:
Net Present Value Analyses. Sandler O'Neill performed an analysis that estimated the net present value per share of Capital Bank Financial common stock, assuming Capital Bank Financial performed in accordance with publicly available mean analyst earnings estimates for Capital Bank Financial for the years ending December 31, 2017 and December 31, 2018 of $1.91 and $2.22, respectively, and an annual earnings per share growth rate of 10% thereafter based on publicly available mean analyst estimated long-term annual earnings per share growth rates, as well as dividend assumptions for Capital Bank Financial, as provided by the senior management of Capital Bank Financial, of $0.50 for the year ending December 31, 2017, $0.57 for the year ending December 31, 2018, $0.63 for the year ending December 31, 2019, $0.69 for the year ending December 31, 2020 and $0.76 for the year ending December 31, 2021. To approximate the terminal value of Capital Bank Financial common stock at December 31, 2021, Sandler O'Neill applied price to 2021 earnings multiples ranging from 18.0x to 22.0x and multiples of December 31, 2021 tangible book value ranging from 180% to 220%. The terminal values were then discounted to present values using different discount rates ranging from 8.0% to 13.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Capital Bank Financial common stock. Sandler O'Neill utilized the equity build-up method to calculate the appropriate discount rate for Capital Bank Financial common stock. As detailed in the following table, which sets forth the calculation of the 10.00% discount rate utilized by Sandler O'Neill in certain of its net present value analyses, the discount rate equals the sum of the risk free rate, the equity risk premium, the size premium and the industry premium.
Risk free rate 2.29%
Equity risk premium 5.80%
Size Premium 1.00%
Industry Premium 0.91%
Discount Rate 10.00%
The risk free rate is represented as the yield on the 10-year U.S. Treasury note as of May 2, 2017. The equity risk premium, size premium and industry premium were sourced from the Duff & Phelps 2016 Valuation Handbook. As illustrated in the following tables, the analysis indicated an imputed range of values per share of Capital Bank Financial common stock of $31.83 to $47.46 when applying multiples of earnings and $31.99 to $47.67 when applying multiples of tangible book value.
The disclosure in the last paragraph on page 76 of the Joint Proxy Statement/Prospectus under the heading "Opinion of Capital Bank Financial's Financial Advisor" is hereby amended and restated to read:
Sandler O'Neill also performed an analysis that estimated the net present value per share of First Horizon common stock, assuming that First Horizon performed in accordance with publicly available mean analyst earnings per share estimates for First Horizon for the years ending December 31, 2017 and December 31, 2018 of $1.11 and $1.30, respectively, as provided by the senior management of First Horizon, and a publicly available mean analyst estimated long-term annual earnings per share growth rate for First Horizon of 7%, as directed by the senior management of Capital Bank Financial. To approximate the terminal value of First Horizon common stock at December 31, 2021, Sandler O'Neill applied price to 2021 earnings multiples ranging from 17.0x to 21.0x and multiples of December 31, 2021 tangible book value ranging from 190% to 230%. The terminal values were then discounted to present values using different discount rates ranging from 8.0% to 13.0%, which were chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of First Horizon common stock. Sandler O'Neill utilized the equity build-up method to calculate the appropriate discount rate for First Horizon common stock. As detailed in the following table, which sets forth the calculation of the 10.00% discount rate utilized by Sandler O'Neill in certain of its net present value analyses, the discount rate equals the sum of the risk free rate, the equity risk premium, the size premium and the industry premium.
Risk free rate 2.29%
Equity risk premium 5.80%
Size Premium 1.00%
Industry Premium 0.91%
Discount Rate 10.00%
The risk free rate is represented as the yield on the 10-year U.S. Treasury note as of May 2, 2017. The equity risk premium, size premium and industry premium were sourced from the Duff & Phelps 2016 Valuation Handbook. As illustrated in the following tables, the analysis indicated an imputed range of values per share of First Horizon common stock of $16.41 to $24.64 when applying earnings multiples and $16.10 to $23.71 when applying multiples of tangible book value.
The disclosure in the first sentence of the last paragraph on page 77 of the Joint Proxy Statement/Prospectus under the heading "Opinion of Capital Bank Financial's Financial Advisor" is hereby amended and restated to read:
Pro Forma Merger Analysis. Sandler O'Neill analyzed certain potential pro forma effects of the merger, assuming the merger closes at the end of the fourth calendar quarter of 2017. In performing this analysis, Sandler O'Neill utilized the following information and assumptions: (i) publicly available mean analyst earnings estimates for Capital Bank Financial for the years ending December 31, 2017 and December 31, 2018 of $1.91 and $2.22, respectively, and an annual earnings per share growth rate of 10% thereafter based on publicly available mean analyst estimated long-term annual earnings per share growth rates, as well as dividend assumptions for Capital Bank Financial, as provided by the senior management of Capital Bank Financial, of $0.50 for the year ending December 31, 2017, $0.57 for the year ending December 31, 2018, $0.63 for the year ending December 31, 2019, $0.69 for the year ending December 31, 2020 and $0.76 for the year ending December 31, 2021; (ii) publicly available mean analyst earnings per share estimates for First Horizon for the years ending December 31, 2017 and December 31, 2018 of $1.11 and $1.30, respectively, as provided by the senior management of First Horizon, and a publicly available mean analyst estimated long-term annual earnings per share growth rate for First Horizon of 7%, as directed by the senior management of Capital Bank Financial; and (iii) certain assumptions relating to purchase
accounting adjustments including a $115.3 million gross credit mark on loans, a $30.2 million rate mark down on loans and a core deposit intangible of 1.50% ($107 million) on core deposits, amortized over 10 years, sum-of-the-years digits, cost savings of approximate 32% of Capital Bank Financial's estimated 2017 noninterest expense based on publicly available mean analyst estimate, and transaction expenses of approximately $121 million pre-tax, as provided by the senior management of First Horizon.
The disclosure in the first full sentence on page 78 of the Joint Proxy Statement/Prospectus under the heading "Opinion of Capital Bank Financial's Financial Advisor – Pro Forma Merger Analysis" is hereby amended and restated to read:
The analysis indicated that the merger could be accretive to First Horizon's earnings per share (excluding one-time transaction costs and expenses) in the years ending December 31, 2018, December 31, 2019 and December 31, 2020 by 5.6%, 7.9% and 8.5%, respectively, and dilutive to First Horizon's estimated tangible book value per share at closing by 10.1% and at December 31, 2018, December 31, 2019 and December 31, 2020 by 8.7%, 6.4% and 4.4%, respectively.
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Important Other Information
In connection with the proposed transaction, First Horizon has filed with the SEC a Registration Statement on Form S-4 (No. 333-219052), which was declared effective on July 28, 2017 and the Joint Proxy Statement/Prospectus dated July 28, 2017, as well as other relevant documents concerning the proposed transaction. The proposed transaction involving First Horizon and Capital Bank Financial will be submitted to First Horizon's shareholders and Capital Bank Financial's stockholders for their consideration. SHAREHOLDERS OF FIRST HORIZON AND CAPITAL BANK FINANCIAL ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY DO AND WILL CONTAIN IMPORTANT INFORMATION. Shareholders may obtain a free copy of the Joint Proxy Statement/Prospectus, as well as other filings containing information about First Horizon and Capital Bank Financial, without charge, at the SEC's website (http://www.sec.gov). Copies of the Joint Proxy Statement/Prospectus and the filings with the SEC that will be incorporated by reference in the Joint Proxy Statement/Prospectus can also be obtained, without charge, by directing a request to Clyde A. Billings, Jr., First Horizon National Corporation, 165 Madison, 13th Floor, Memphis, TN 38103, telephone 901.523.5679, or Capital Bank Financial Corp., Attention: Secretary, 4725 Piedmont Row Drive, Suite 110, Charlotte, NC 28210.
Participants in the Solicitation
First Horizon, Capital Bank Financial, and certain of their respective directors, executive officers and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding First Horizon's directors and executive officers is available in its definitive proxy statement, which was filed with the SEC on March 13, 2017, and certain of its Current Reports on Form 8-K. Information regarding Capital Bank Financial's directors and executive officers is available in its definitive proxy statement, which was filed with the SEC on April 28, 2017, and certain of its Current Reports on Form 8-K. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the Joint Proxy Statement/Prospectus and other relevant materials filed with the SEC. Free copies of this document may be obtained as described in the preceding paragraph.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
