On Monday, the regional bank, People's United Financial, Inc. PBCT, came up with an expansion plan in the New York State. The bank is increasing its footprints in New York with the acquisition of Riverhead-based Suffolk Bancorp SCNB. The all stock-deal is valued at $402 million.
The deal which is anticipated to close late in the fourth-quarter 2016 is subject to certain customary closing conditions and awaits regulatory approval and Suffolk Bancorp's shareholders’ consent.
The transaction is expected to be accretive to earnings, excluding one-time costs with an IRR of about 17% and a tangible book value earn-back within five years.
"We are proud to welcome Suffolk County National Bank to People's United Bank," said Jack Barnes, President and Chief Executive Officer of People's United Financial. "With the 9th largest market share in Suffolk County, a solid relationship-banking approach and loyal, long-tenured customers, Suffolk County National Bank's strong Long Island presence complements our previous acquisitions and organic growth in the New York Metro area."
Terms of the Agreement
Per terms of the deal, shareholders of Suffolk Bancorp will get 2.225 shares of People's United for each share. Based on the closing price of People's United's common stock on Jun 24, 2016, per Suffolk Bancorp share is valued at $33.55. Moreover, these terms are 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 People's United, while Keefe, Bruyette & Woods, Inc. served as financial advisor to Suffolk Bancorp.
Howard C. Bluver, President and Chief Executive Officer of Suffolk Bancorp will join People's United Bank as President of New York Market. Bluver will provide his guidance in the integration of Suffolk Bancorp with People's United. "Howard's deep roots in the region, his understanding of the local economy and his proven ability for growth will continue our momentum in this important market," said Barnes.
Acquisition Spree
In Mar 2012, People’s United increased its footprints in New York with the acquisition of 56 branches from RBS Citizens. In 2010, the bank completed the acquisitions of Smithtown Bancorp Inc. and LSB Corporation. These acquisitions extended the company’s presence in New England and New York State and were accretive to the company’s 2011 earnings.
Further, People’s United’s acquisition of Danvers Bancorp Inc. in 2011 built a platform for growth of the company and made People’s United New England’s largest independent bank as well as the seventh largest bank, both in Massachusetts and Boston, MSA.
Our Viewpoint
Overall, People's United is trying to overcome the challenging economic environment through opportunistic acquisitions and cost reduction initiatives. The acquisitions reflect its strong capital and liquidity position. Going forward, growth in loans and deposits are expected to boost the company’s financial results. However, recent regulatory issues and economic weakness might act as headwinds.
People's United currently carries a Zacks Rank #4 (Sell). A better-ranked finance stock includes First Niagara Financial Group Inc. FNFG with a Zacks Rank #2 (Buy).
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