Olympia, Wash.-based Heritage Financial (NASDAQ:HFWA) has signed a definitive agreement to acquire privately owned Valley Community Bancshares -- itself owner of Valley Bank of Puyallup, Wash., the companies announced Tuesday.

Heritage is paying a 50-50 mix of cash and stock for Valley Community, valuing its target at roughly $39 a share, or $44.2 million in all. Upon closing, which is expected to take place in Q3, Valley Community shareholders will be paid $19.50 cash, and 1.3611 shares of Heritage common stock, for each share of Valley Community they own. At this price, Heritage is paying approximately 0.18 times assets for Valley Community (whose sales and profits were not disclosed). This amounts to a small premium over the 0.16 times assets valuation that Heritage's own shares command.

Justifying the acquisition, Heritage CEO Brian Vance said in a statement that the creation of a merged institution with $1.6 billion in assets will yield "good synergies" between the two businesses. Investors appear to agree. In Tuesday trading, Heritage shares gained 3.2% to close at $14.28.

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