Waterbury, Conn.-based Webster Financial Corp. and Pearl River, N.Y.-based Sterling Bancorp announced that their boards have approved by unanimous vote a definitive agreement that will see both companies combine in an all-stock merger of equals with a deal value of $5.14 billion at announcement.
The merger is expected to close in the fourth quarter.
Under the deal, Sterling Bancorp will merge into Webster Financial. Sterling Bancorp's shareholders will receive a fixed exchange ratio of 0.463 of a Webster share for each share of Sterling stock they own. Following the closing of the transaction, Webster shareholders will own approximately 50.4% of the combined company, and Sterling shareholders will own approximately 49.6%, on a fully diluted basis.
At announcement, S&P Global Market Intelligence calculates the deal value to be 114.08% of common equity, 188.72% of tangible common equity and 17.03x earnings. The deal value is also 17.20% of assets and 21.58% of deposits.
S&P Global Market Intelligence valuations for bank and thrift targets in the Mid-Atlantic region between April 18, 2020, and April 18, 2021, averaged 108.11% of book and 128.65% of tangible book and had a median of 22.09x last-12-months earnings, on a per-share basis.
The combined company will retain the Webster name and set up a new headquarters in Stamford, Conn. The combined company is expected to have $63 billion in assets, $52 billion in deposits and $42 billion in loans.
According to S&P Global Market Intelligence data, the combined company will operate 84 branches in New York, to be ranked No. 31 with a 0.74% share of about $3.174 trillion in total market deposits, 109 branches in Connecticut to be ranked third with a 12.52% share of roughly $186.09 billion in total market deposits, 21 branches in Massachusetts to be ranked No. 24 with a 0.47% share of approximately $498.54 billion in total market deposits, and eight branches in Rhode Island, to be ranked No. 10 with a 1.47% share of about $37.32 billion in total market deposits.
The combined entity is estimated to generate a return on average assets of 1.40%, return on average tangible common equity of 17% and $440 million per year, or about $2.50 per share, of excess capital after organic growth and dividends. The deal is also expected to result in more than 20% GAAP EPS accretion for Webster Financial shareholders and more than 10% GAAP EPS accretion for Sterling Bancorp shareholders, after realizing $120 million of projected cost savings.
Jack Kopnisky, president and CEO of Sterling Bancorp, will serve as executive chairman of the combined entity for two years after closing and will continue in a consulting capacity thereafter for another one year. John Ciulla, who serves as chairman, president and CEO of Webster Financial, will serve as president and CEO of the combined company until two years after closing, at which time he will become chairman, president and CEO.
Luis Massiani and Glenn MacInnes will serve as COO and CFO, respectively.
The combined entity's board will have 15 directors, consisting of eight directors from Webster Financial and seven directors from Sterling Bancorp, including Kopnisky and Ciulla.
In addition, William Atwell, who is the lead independent director of Webster Financial, will serve as lead independent director for two years after closing, after which the lead independent director will be a legacy Sterling Bancorp director.
J.P. Morgan Securities LLC acted as lead financial adviser to Webster Financial and rendered a fairness opinion to its board. Piper Sandler & Co. also rendered a fairness opinion to Webster Financial's board. Wachtell Lipton Rosen & Katz is serving as legal counsel to Webster Financial.
Citigroup Global Markets Inc. acted as lead financial adviser to Sterling Bancorp and rendered a fairness opinion to its board. Keefe Bruyette & Woods Inc. also rendered a fairness opinion to Sterling Bancorp's board. Squire Patton Boggs (US) LLP is serving as legal counsel to Sterling Bancorp.
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