Berkshire Hills Bancorp to acquire Beacon Federal Bancorp
Berkshire Hills Bancorp, Inc (NASDAQ:BHLB) and Beacon Federal Bancorp, Inc. (“Beacon”) (NASDAQ:BFED) announced today that they have signed a definitive merger agreement under which Berkshire will acquire Beacon in a transaction valued at approximately $132 million. Under the agreement, Beacon’s subsidiary bank, Beacon Federal, will be merged into Berkshire Bank.
Beacon is headquartered in East Syracuse, New York and operates seven full service offices with deposits totaling $677 million at March 31, 2012. The majority of its business is concentrated in the Syracuse market, as well as the Rome/Utica market which Berkshire entered last year with the acquisition of Rome Bancorp. When the merger is completed, Berkshire will have a total of ten branches serving these markets, with approximately $700 million in deposits and third position in market share among regional banks. Additionally, Berkshire will add Beacon’s Chelmsford, Massachusetts office located north of Boston, which will be Berkshire’s first Eastern Massachusetts full service branch office, complementing the ten residential and commercial lending offices that Berkshire presently operates in Central/Eastern Massachusetts.
Under the terms of the merger agreement, 50% of the outstanding Beacon shares will be exchanged for Berkshire shares at a fixed exchange ratio of 0.92 shares for each Beacon share, while the remaining 50% of Beacon shares will be exchanged for cash in the amount of $20.50 per share.
The transaction is valued at $20.35 per Beacon share, based on the $21.96 Berkshire closing stock price on May 30, 2012. This represents 111% of Beacon’s tangible book value per share and a 3.4% premium to core deposits based on financial information for the period ended March 31, 2012.
Michael P. Daly, Berkshire’s President and Chief Executive Officer, stated, “We are very pleased to extend our presence in Central New York in this partnership with Beacon. Our New York expansion last year exceeded our expectations in terms of financial return, customer retention, and business development opportunities. I am confident that our Beacon partnership will also prove to be a solid success for all of our constituencies. This merger will bring our total Central and Eastern New York branch count to 26 offices, with total deposits exceeding $1.4 billion. With our regional bank product set, community involvement, and our engaging brand and culture, we are well positioned to continue to build market share as the preferred personal and commercial banking partner.”
Mr. Daly continued, “We expect that this business combination will produce approximately $0.22 per share in core earnings accretion in 2013, which is a 10% increase to $2.37 per share over the current consensus analyst estimate. It further represents combined growth of 24% over the 2012 consensus estimate. This reflects the benefits of our combined strategies for organic growth, de novo branching, team recruitment, and disciplined business combinations. The metrics of this merger demonstrate that it is fairly priced and will produce strong capital generation and an attractive return to investors. Our goal is that the higher earnings and return on equity will enhance the value of our stock for both existing shareholders and for new shareholders from Beacon joining us in this transaction.”
Ross J. Prossner, Beacon’s President and Chief Executive Officer, stated “We are excited to be joining forces with the dynamic Berkshire Bank team. Our customers will benefit from Berkshire’s resources in banking, wealth management and insurance. Our combined operations will position us well to further increase market share in the Central New York market. This transaction produces a very attractive immediate return to our shareholders and we are pleased that 50% of the merger consideration will be in the form of Berkshire stock.”
Each Beacon shareholder will have the right to elect the form of consideration, subject to proration procedures to maintain the overall 50%/50% mix of stock and cash consideration. The transaction is intended to qualify as a reorganization for federal income tax purposes, and as a result, the shares of Beacon common stock exchanged for shares of Berkshire common stock are expected to be transferred on a tax-free basis.
The definitive agreement has been approved by the unanimous vote of the Boards of Directors of both Berkshire and Beacon. Consummation of the agreement is subject to the approval of Beacon’s shareholders, as well as state and federal regulatory agencies.
The merger is expected to be completed in the fourth quarter of 2012. One Beacon director will be appointed to Berkshire’s board of directors. Berkshire anticipates that it will divest Beacon’s modest sized Tennessee operations in conjunction with the consummation of this merger.
Sandler O'Neill & Partners, L.P. served as the financial advisor to Berkshire, and Keefe, Bruyette & Woods, Inc. served as the financial advisor for Beacon. Luse Gorman Pomerenk & Schick, P.C. served as outside legal counsel to Berkshire, while Kilpatrick Townsend & Stockton LLP served as outside legal counsel to Beacon.
A telephone replay of the call will be available through June 10, 2012 by calling 877-344-7529 and entering access code: 10014754. The webcast and a podcast will be available at Berkshire’s website above for an extended period of time.
BACKGROUND Berkshire Hills Bancorp is the parent of Berkshire Bank. Including the recently acquired operations of CBT, Berkshire has $4.3 billion in assets and 68 full service branch offices in Massachusetts, New York, Connecticut, and Vermont providing personal and business banking, insurance, and wealth management services. Berkshire Bank provides 100% deposit insurance protection for all deposit accounts, regardless of amount, based on a combination of FDIC insurance and the Depositors Insurance Fund (DIF). For more information, visit www.berkshirebank.com.
Beacon Federal Bancorp, Inc., through its bank subsidiary, Beacon Federal, offers banking and related financial services to both individual and commercial customers. The Bank is headquartered with a full-service branch in East Syracuse, New York, along with six other full-service branches in East Syracuse, Marcy and Rome, New York, Smartt and Smyrna, Tennessee, and Chelmsford, Massachusetts.