On Thursday, Renasant Corporation (NASDAQ:RNST) announced that it has signed a definitive merger agreement with Merchants & Farmers Bank parent First M&F Corporation (NASDAQ:FMFC).

Assuming regulators do not object, and the merger proceeds to completion by the end of Q3 2013, as planned, the combined company (to be called Renasant) will hold $5.8 billion in assets, making it the fourth largest bank by deposits in the state of Mississippi.

Pursuant to the merger terms, Renasant will issue M&F shareholders 0.6425 of its own shares in exchange for each one M&F share that they own. By Renasant's calculation, this makes the purchase price for M&F $118.8 million, or 119% of tangible book value. This is compared to Renasant's own shares, which are currently valued at 1.6x tangible book  by the market -- suggesting Renasant is getting a very good deal, indeed.

Investors, however, are not so sure, and currently have sold off Renasant shares by more than 2.1%, to $19.02. (M&F shareholders, in contrast, are ebullient, bidding the stock up 39% on today's news).

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.