People's United Financial, Inc. PBCT, the U.S. regional bank, has come up with an expansion plan in Greater Boston. The bank is expanding its footprint with the acquisition of Belmont-based BSB Bancorp, Inc. BLMT. The all-stock deal is valued at $327 million.
The transaction, anticipated to close by second-quarter 2019, is subject to certain customary closing conditions, and awaits regulatory approval and BSB Bancorp's shareholders’ consent.
The deal is expected to be accretive to earnings by 3 cents, based on fully phased-in cost savings, with an IRR of more than 20% and a tangible book value earn-back within 3.1 years.
“We are pleased to welcome Belmont Savings Bank to People’s United,” said Jack Barnes, chairman and CEO, People’s United Financial. “Together, we share a similar culture, a customer-centric approach to banking and guiding principles centered on relationships, personalized service and community giving. The acquisition will deepen and expand our presence in the Greater Boston area, particularly in the suburbs west of the city, which are attractive banking markets. As such, our Boston MSA deposit market share rank will increase from #13 to #8 on a pro-forma basis,” Barnes further noted.
Terms of the Agreement
Per terms of the deal, shareholders of BSB Bancorp will get 2 shares of People's United for each share. Based on the closing price of People's United's common stock on Nov 26, 2018, per BSB Bancorp share is valued at $32.42. Moreover, these terms have been approved by boards of directors of both companies.
J.P. Morgan Securities LLC, a unit of JPMorgan Chase & Co. JPM acted as financial advisor to BSB Bancorp, while Keefe, Bruyette & Woods, Inc. was the advisor to People's United.
“The acquisition of Belmont complements our strong organic growth in the Commonwealth of Massachusetts, particularly in the Greater Boston area,” said Patrick Sullivan, EVP, Massachusetts Market President, People’s United Bank. “We see significant opportunity for further growth in the region, with an eye toward delivering an expanded, tailored service model. The transaction enhances our already robust team of commercial and retail bankers and builds upon the momentum we are generating with the opening of our Seaport branch location early next year, and the recent addition of three new specialized business lines to our Boston-based Commercial team,” he added.
People’s United’s inorganic growth activities reflect capital strength and the bank’s efforts to boost its performance. Also, it has diversified revenue sources, which are likely to support the bank’s financials. Additionally, the company will benefit from improving conditions in the domestic economy.
Shares of People’s United have lost 12.7% over the past six months compared with the 9.6% decline witnessed by the industry. Currently, People’s United carries a Zacks Rank #3 (Hold).
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