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Prosperity Bancshares Inc. has struck a deal to acquire Stellar Bancorp Inc. and its banking subsidiary in a transaction valued at roughly $2 billion, the companies announced Wednesday — a move set to redraw the banking map in Texas like a river changing course.

Under the agreement, Prosperity to buy Stellar Bancorp through a mix of stock and cash, deepening its footprint in some of the state’s most competitive markets.

Deal Structure and Valuation

Prosperity will issue 0.3803 shares of its common stock and pay $11.36 in cash for each outstanding share of Stellar common stock, according to the announcement. The valuation is based on Prosperity’s Tuesday closing price of $72.90.

Markets reacted swiftly. By Wednesday afternoon, Prosperity shares were down more than 8%, trading at $66.49 per share, reflecting investor recalibration as the scale of the deal sank in.

Advisors and Legal Counsel

Prosperity is being advised by Wachtell, Lipton, Rosen & Katz, while Norton Rose Fulbright is serving as legal counsel to Stellar. Stellar is also working with Keefe, Bruyette & Woods as its financial adviser.

Wachtell Lipton’s deal team is led by partners Edward D. Herlihy and Matthew T. Carpenter. Deal team details for Norton Rose Fulbright were not immediately available.

Stellar’s Texas Footprint

Banking Network and Financials

Stellar Bank operates 52 banking offices across greater Houston, Beaumont and Dallas. As of Dec. 31, the company reported:

• More than $10.8 billion in consolidated total assets

• Approximately $7.3 billion in total loans

• Over $9.02 billion in total deposits

Those numbers bring significant heft to Prosperity’s balance sheet and geographic reach.

Leadership Roles After the Merger

The deal keeps familiar faces at the helm. Robert R. Franklin Jr., Stellar’s CEO and executive chair of Stellar Bank, will join Prosperity Bank as vice chair.

Ramon Vitulli, Stellar’s president and CEO, will become Houston area chair at Prosperity Bank. Additional members of Stellar’s management team are expected to retain leadership roles within the combined organization.

Upon closing, Franklin and one additional Stellar board member will join the Prosperity board of directors, while Vitulli and Pat Parsons, a director of Stellar Bank, will take seats on the Prosperity Bank board.

Creating a Texas Banking Heavyweight

Prosperity senior chair and CEO David Zalman said the merger will create the second-largest bank by deposits headquartered in Texas, boasting more than 330 banking centers statewide.

Zalman said the combination expands scale and “better positions us to invest in future opportunities and serve our customers,” adding that the deal is expected to significantly strengthen Prosperity’s presence in the Houston market.

Franklin echoed that view, describing the companies as having a “complementary footprint” and saying the merger will form “one of the strongest Texas banking franchises,” with broader capabilities and added financial muscle.