Why Home BancShares Leapt Higher

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Home BancShares (NASDAQ: HOMB  ) , the holding company of Centennial Bank, jumped as much as 13% after receiving an analyst upgrade.

So what: Before we get to the upgrade we have to understand the impetus for the upgrade which was yesterday's announced merger between Home BancShares and Liberty BancShares which will create the second-largest bank headquartered in Arkansas. Under the terms of the deal, Liberty's shareholders will receive $250 million in Home BancShares' stock and $30 million in cash. In lieu of the merger, research firm Wunderlich upgraded Home BancShares to "buy" from "hold" and upped its price target all the way to $29 from a previous mark of $20.50.

Now what: As I've said before, if there's an industry more ripe for mergers and acquisitions than any other it's regional banks. Many would do well for themselves and shareholders by combining their strengths to take on national banks which aren't seen in particularly good light by consumers. The combined bank will have $7.1 billion in assets and will double the number of branches Home BancShares currently possesses, making it a positive move, at least from what I'm seeing on paper.

Craving more input? Start by adding Home BancShares to your free and personalized Watchlist so you can keep up on the latest news with the company.

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