NEW YORK (AP) -- Shares of Webster Financial Corp. fell Friday after it announced that its biggest shareholders plans to sell 10 million shares of common stock in an underwritten public offering.
THE SPARK: Warburg Pincus Private Equity X LP priced the offering at $20.10 per share. That represents a 4 percent discount to the Thursday closing stock price of $20.89.
THE BIG PICTURE: The offering is set to close on Wednesday. After that happens, Warburg Pincus will own about 14 percent of Webster's common stock.
In response, Webster Financial, the Waterbury, Conn.-based parent company of Webster Bank, said that its board approved a $100 million common stock buyback program. Webster will buy about 2.5 million shares of its common stock in the Warburg Pincus offering at a price equal to the price per share being paid by that offering's underwriter.
Webster won't receive any of the proceeds from Warburg Pincus' offering.
THE ANALYSIS: Jefferies analyst Casey Haire said that while the private equity firm's move doesn't bode well for Webster, Warburg Pincus is probably just trying to get the most out of a successful investment before higher tax rates kick in next year.
Haire, who rated the company "Hold" with a $23 price target, noted that Warburg Pincus will remain Webster's largest shareholder after the offering, and the stock buyback boosts returns for shareholders.
THE SHARES: Down 96 cents, or 4.6 percent, to $19.93 in heavy afternoon trading, after falling as low as $19.81 earlier in the day. Over the past 52 weeks, the company's shares have traded between $18.30 and $24.98.